Out of thousands of stocks that are currently traded on the market, it is difficult to identify those that will really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of nearly 817 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has the potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about NuCana plc (NASDAQ:NCNA).
Is NCNA a good stock to buy now? NuCana plc (NASDAQ:NCNA) investors should pay attention to an increase in enthusiasm from smart money recently. NuCana plc (NASDAQ:NCNA) was in 8 hedge funds’ portfolios at the end of September. The all time high for this statistics is 9. There were 4 hedge funds in our database with NCNA holdings at the end of June. Our calculations also showed that NCNA isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 66 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 5 best cheap stocks to buy according to Ray Dalio to identify stocks with upside potential. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. With all of this in mind let’s review the new hedge fund action surrounding NuCana plc (NASDAQ:NCNA).
What have hedge funds been doing with NuCana plc (NASDAQ:NCNA)?
At the end of September, a total of 8 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 100% from the previous quarter. On the other hand, there were a total of 6 hedge funds with a bullish position in NCNA a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in NuCana plc (NASDAQ:NCNA) was held by Harvard Management Co, which reported holding $12.1 million worth of stock at the end of September. It was followed by Granite Point Capital with a $4.1 million position. Other investors bullish on the company included Sectoral Asset Management, Renaissance Technologies, and Wildcat Capital Management. In terms of the portfolio weights assigned to each position Harvard Management Co allocated the biggest weight to NuCana plc (NASDAQ:NCNA), around 0.66% of its 13F portfolio. Sectoral Asset Management is also relatively very bullish on the stock, dishing out 0.33 percent of its 13F equity portfolio to NCNA.
Consequently, specific money managers were leading the bulls’ herd. Granite Point Capital, managed by Warren Lammert, initiated the most outsized position in NuCana plc (NASDAQ:NCNA). Granite Point Capital had $4.1 million invested in the company at the end of the quarter. Jerome Pfund and Michael Sjostrom’s Sectoral Asset Management also initiated a $3.9 million position during the quarter. The following funds were also among the new NCNA investors: Israel Englander’s Millennium Management, Michael Gelband’s ExodusPoint Capital, and Gavin Saitowitz and Cisco J. del Valle’s Prelude Capital (previously Springbok Capital).
Let’s go over hedge fund activity in other stocks similar to NuCana plc (NASDAQ:NCNA). These stocks are ORBCOMM Inc (NASDAQ:ORBC), Metacrine, Inc. (NASDAQ:MTCR), Arbutus Biopharma Corp (NASDAQ:ABUS), Liminal BioSciences Inc. (NASDAQ:LMNL), Stereotaxis Inc (NASDAQ:STXS), iRadimed Corporation (NASDAQ:IRMD), and Capital Southwest Corporation (NASDAQ:CSWC). This group of stocks’ market values are similar to NCNA’s market value.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 8.3 hedge funds with bullish positions and the average amount invested in these stocks was $38 million. That figure was $23 million in NCNA’s case. Stereotaxis Inc (NASDAQ:STXS) is the most popular stock in this table. On the other hand Liminal BioSciences Inc. (NASDAQ:LMNL) is the least popular one with only 1 bullish hedge fund positions. NuCana plc (NASDAQ:NCNA) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for NCNA is 62.6. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 31.6% in 2020 through December 2nd and surpassed the market again by 16 percentage points. Unfortunately NCNA wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); NCNA investors were disappointed as the stock returned -11.4% since the end of September (through 12/2) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
Disclosure: None. This article was originally published at Insider Monkey.