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Is Nightstar Therapeutics plc (NITE) Going to Burn These Hedge Funds?

During the first half of the fourth quarter the Russell 2000 ETF (IWM) lagged the larger S&P 500 ETF (SPY) by about 4 percentage points as investors worried over the possible ramifications of rising interest rates. The hedge funds and institutional investors we track typically invest more in smaller-cap stocks than an average investor (i.e. only 298 S&P 500 constituents were among the 500 most popular stocks among hedge funds), and we have seen data that shows those funds paring back their overall exposure. Those funds cutting positions in small-caps is one reason why volatility has increased. In the following paragraphs, we take a closer look at what hedge funds and prominent investors think of Nightstar Therapeutics plc (NASDAQ:NITE) and see how the stock is affected by the recent hedge fund activity.

Nightstar Therapeutics plc (NASDAQ:NITE) was in 12 hedge funds’ portfolios at the end of the third quarter of 2018. NITE investors should be aware of an increase in support from the world’s most elite money managers lately. There were 7 hedge funds in our database with NITE holdings at the end of the previous quarter. Our calculations also showed that nite isn’t among the 30 most popular stocks among hedge funds.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 6.3% year to date (through December 3rd) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 18 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

James Flynn Deerfield Management

We’re going to take a glance at the latest hedge fund action encompassing Nightstar Therapeutics plc (NASDAQ:NITE).

How are hedge funds trading Nightstar Therapeutics plc (NASDAQ:NITE)?

At Q3’s end, a total of 12 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 71% from the second quarter of 2018. The graph below displays the number of hedge funds with bullish position in NITE over the last 13 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were adding to their stakes significantly (or already accumulated large positions).

No of Hedge Funds with NITE Positions

Among these funds, Redmile Group held the most valuable stake in Nightstar Therapeutics plc (NASDAQ:NITE), which was worth $42.5 million at the end of the third quarter. On the second spot was Point72 Asset Management which amassed $31.2 million worth of shares. Moreover, Woodford Investment Management, Deerfield Management, and Sectoral Asset Management were also bullish on Nightstar Therapeutics plc (NASDAQ:NITE), allocating a large percentage of their portfolios to this stock.

As aggregate interest increased, some big names have jumped into Nightstar Therapeutics plc (NASDAQ:NITE) headfirst. Point72 Asset Management, managed by Steve Cohen, initiated the biggest position in Nightstar Therapeutics plc (NASDAQ:NITE). Point72 Asset Management had $31.2 million invested in the company at the end of the quarter. James E. Flynn’s Deerfield Management also initiated a $10.2 million position during the quarter. The other funds with new positions in the stock are Jerome Pfund and Michael Sjostrom’s Sectoral Asset Management, Jim Simons’s Renaissance Technologies, and Ken Griffin’s Citadel Investment Group.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Nightstar Therapeutics plc (NASDAQ:NITE) but similarly valued. We will take a look at NII Holdings, Inc. (NASDAQ:NIHD), Bank of Marin Bancorp (NASDAQ:BMRC), Peapack-Gladstone Financial Corp (NASDAQ:PGC), and First Trust MLP and Energy Income Fund (NYSE:FEI). This group of stocks’ market caps match NITE’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
NIHD 17 160622 3
BMRC 7 24451 2
PGC 15 92823 1
FEI 2 591 1
Average 10.25 69622 1.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 10.25 hedge funds with bullish positions and the average amount invested in these stocks was $70 million. That figure was $111 million in NITE’s case. NII Holdings, Inc. (NASDAQ:NIHD) is the most popular stock in this table. On the other hand First Trust MLP and Energy Income Fund (NYSE:FEI) is the least popular one with only 2 bullish hedge fund positions. Nightstar Therapeutics plc (NASDAQ:NITE) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard NIHD might be a better candidate to consider a long position.

Disclosure: None. This article was originally published at Insider Monkey.

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