At Insider Monkey, we pore over the filings of nearly 817 top investment firms every quarter, a process we have now completed for the latest reporting period. The data we’ve gathered as a result gives us access to a wealth of collective knowledge based on these firms’ portfolio holdings as of September 30. In this article, we will use that wealth of knowledge to determine whether or not Minerva Neurosciences, Inc (NASDAQ:NERV) makes for a good investment right now.
Is NERV a good stock to buy now? Minerva Neurosciences, Inc (NASDAQ:NERV) investors should pay attention to an increase in activity from the world’s largest hedge funds recently. Minerva Neurosciences, Inc (NASDAQ:NERV) was in 15 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistic is 18. There were 14 hedge funds in our database with NERV holdings at the end of June. Our calculations also showed that NERV 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.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
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 15 best blue chip stocks to pick the best large-cap stocks to buy. 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 check out the new hedge fund action surrounding Minerva Neurosciences, Inc (NASDAQ:NERV).
Do Hedge Funds Think NERV Is A Good Stock To Buy Now?
At third quarter’s end, a total of 15 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 7% from one quarter earlier. By comparison, 11 hedge funds held shares or bullish call options in NERV a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Opaleye Management was the largest shareholder of Minerva Neurosciences, Inc (NASDAQ:NERV), with a stake worth $2.4 million reported as of the end of September. Trailing Opaleye Management was Renaissance Technologies, which amassed a stake valued at $2.1 million. Frazier Healthcare Partners, Armistice Capital, and Two Sigma Advisors were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Opaleye Management allocated the biggest weight to Minerva Neurosciences, Inc (NASDAQ:NERV), around 0.48% of its 13F portfolio. Frazier Healthcare Partners is also relatively very bullish on the stock, earmarking 0.16 percent of its 13F equity portfolio to NERV.
Now, key money managers have been driving this bullishness. Opaleye Management, managed by James A. Silverman, established the largest position in Minerva Neurosciences, Inc (NASDAQ:NERV). Opaleye Management had $2.4 million invested in the company at the end of the quarter. Alan Frazier’s Frazier Healthcare Partners also made a $1.7 million investment in the stock during the quarter. The only other fund with a brand new NERV position is Michael Gelband’s ExodusPoint Capital.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Minerva Neurosciences, Inc (NASDAQ:NERV) but similarly valued. We will take a look at Genprex, Inc. (NASDAQ:GNPX), AgEagle Aerial Systems, Inc. (NYSE:UAVS), Atento SA (NYSE:ATTO), Intevac, Inc. (NASDAQ:IVAC), Alithya Group inc. (NASDAQ:ALYA), Auburn National Bancorporation, Inc. (NASDAQ:AUBN), and First Savings Financial Group, Inc. (NASDAQ:FSFG). All of these stocks’ market caps are similar to NERV’s market cap.
|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 3.4 hedge funds with bullish positions and the average amount invested in these stocks was $6 million. That figure was $12 million in NERV’s case. Intevac, Inc. (NASDAQ:IVAC) is the most popular stock in this table. On the other hand Auburn National Bancorporation, Inc. (NASDAQ:AUBN) is the least popular one with only 1 bullish hedge fund positions. Compared to these stocks Minerva Neurosciences, Inc (NASDAQ:NERV) is more popular among hedge funds. Our overall hedge fund sentiment score for NERV is 81. 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. 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 30.7% in 2020 through December 14th and still beat the market by 15.8 percentage points. Unfortunately NERV wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on NERV were disappointed as the stock returned -16.7% since the end of the third quarter (through 12/14) 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.
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Disclosure: None. This article was originally published at Insider Monkey.