In this article we will check out the progression of hedge fund sentiment towards NGM Biopharmaceuticals, Inc. (NASDAQ:NGM) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.
Is NGM a good stock to buy now? NGM Biopharmaceuticals, Inc. (NASDAQ:NGM) shares haven’t seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 12 hedge funds’ portfolios at the end of September. Our calculations also showed that NGM 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). At the end of this article we will also compare NGM to other stocks including Calix Inc (NYSE:CALX), Getty Realty Corp. (NYSE:GTY), and Realogy Holdings Corp (NYSE:RLGY) to get a better sense of its popularity.
Video: Watch our video about the top 5 most popular hedge fund stocks.
To most traders, hedge funds are seen as worthless, outdated investment tools of the past. While there are greater than 8000 funds with their doors open at present, Our researchers choose to focus on the upper echelon of this group, about 850 funds. Most estimates calculate that this group of people oversee most of the hedge fund industry’s total asset base, and by shadowing their top stock picks, Insider Monkey has formulated several investment strategies that have historically outrun Mr. Market. Insider Monkey’s flagship short hedge fund strategy outstripped the S&P 500 short ETFs by around 20 percentage points per year since its inception in March 2017. Our portfolio of short stocks lost 13% since February 2017 (through November 17th) even though the market was up 65% during the same period. We just shared a list of 6 short targets in our latest quarterly update .
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. Keeping this in mind let’s check out the key hedge fund action regarding NGM Biopharmaceuticals, Inc. (NASDAQ:NGM).
Do Hedge Funds Think NGM Is A Good Stock To Buy Now?
Heading into the fourth quarter of 2020, a total of 12 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the second quarter of 2020. On the other hand, there were a total of 9 hedge funds with a bullish position in NGM a year ago. With hedge funds’ capital changing hands, there exists a few noteworthy hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).
More specifically, Point72 Asset Management was the largest shareholder of NGM Biopharmaceuticals, Inc. (NASDAQ:NGM), with a stake worth $25.6 million reported as of the end of September. Trailing Point72 Asset Management was Greenspring Associates, which amassed a stake valued at $25 million. Aquilo Capital Management, Rock Springs Capital Management, and Jasper Ridge Partners 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 Greenspring Associates allocated the biggest weight to NGM Biopharmaceuticals, Inc. (NASDAQ:NGM), around 38.95% of its 13F portfolio. Aquilo Capital Management is also relatively very bullish on the stock, dishing out 1.72 percent of its 13F equity portfolio to NGM.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Arrowstreet Capital. One hedge fund selling its entire position doesn’t always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don’t think this is the case in this case because only one of the 800+ hedge funds tracked by Insider Monkey identified as a viable investment and initiated a position in the stock (that fund was Weld Capital Management).
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as NGM Biopharmaceuticals, Inc. (NASDAQ:NGM) but similarly valued. We will take a look at Calix Inc (NYSE:CALX), Getty Realty Corp. (NYSE:GTY), Realogy Holdings Corp (NYSE:RLGY), K12 Inc. (NYSE:LRN), Black Diamond Therapeutics, Inc. (NASDAQ:BDTX), Middlesex Water Company (NASDAQ:MSEX), and Fresh Del Monte Produce Inc (NYSE:FDP). This group of stocks’ market values are similar to NGM’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 16.6 hedge funds with bullish positions and the average amount invested in these stocks was $134 million. That figure was $84 million in NGM’s case. Realogy Holdings Corp (NYSE:RLGY) is the most popular stock in this table. On the other hand Middlesex Water Company (NASDAQ:MSEX) is the least popular one with only 5 bullish hedge fund positions. NGM Biopharmaceuticals, Inc. (NASDAQ:NGM) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for NGM is 50.9. 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 32.9% in 2020 through December 8th and still beat the market by 16.2 percentage points. A small number of hedge funds were also right about betting on NGM as the stock returned 58.3% since the end of the third quarter (through 12/8) and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.