Is ODT A Good Stock To Buy Now According To Hedge Funds?

Is Odonate Therapeutics, Inc. (NASDAQ:ODT) a good place to invest some of your money right now? We can gain invaluable insight to help us answer that question by studying the investment trends of top investors, who employ world-class Ivy League graduates, who are given immense resources and industry contacts to put their financial expertise to work. The top picks of these firms have historically outperformed the market when we account for known risk factors, making them very valuable investment ideas.

Is ODT a good stock to buy now? Investors who are in the know were in an optimistic mood. The number of long hedge fund positions went up by 1 recently. Odonate Therapeutics, Inc. (NASDAQ:ODT) was in 17 hedge funds’ portfolios at the end of September. The all time high for this statistic is 16. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that ODT 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.

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 monthly stock picks returned 113% since March 2017 and outperformed the S&P 500 ETFs by more than 66 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Richard Driehaus of Driehaus Capital

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. Now let’s go over the recent hedge fund action encompassing Odonate Therapeutics, Inc. (NASDAQ:ODT).

Do Hedge Funds Think ODT Is A Good Stock To Buy Now?

At Q3’s end, a total of 17 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 6% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in ODT over the last 21 quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists an “upper tier” of noteworthy hedge fund managers who were boosting their stakes considerably (or already accumulated large positions).

Among these funds, Tang Capital Management held the most valuable stake in Odonate Therapeutics, Inc. (NASDAQ:ODT), which was worth $204.7 million at the end of the third quarter. On the second spot was Driehaus Capital which amassed $15.7 million worth of shares. Samsara BioCapital, Rock Springs Capital Management, 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 Tang Capital Management allocated the biggest weight to Odonate Therapeutics, Inc. (NASDAQ:ODT), around 37.03% of its 13F portfolio. Samsara BioCapital is also relatively very bullish on the stock, earmarking 3.05 percent of its 13F equity portfolio to ODT.

Consequently, key hedge funds were leading the bulls’ herd. Sio Capital, managed by Michael Castor, initiated the biggest position in Odonate Therapeutics, Inc. (NASDAQ:ODT). Sio Capital had $1.8 million invested in the company at the end of the quarter. Greg Eisner’s Engineers Gate Manager also initiated a $1.2 million position during the quarter. The following funds were also among the new ODT investors: Renaissance Technologies and Paul Marshall and Ian Wace’s Marshall Wace LLP.

Let’s now review hedge fund activity in other stocks similar to Odonate Therapeutics, Inc. (NASDAQ:ODT). These stocks are ViewRay, Inc. (NASDAQ:VRAY), Crinetics Pharmaceuticals, Inc. (NASDAQ:CRNX), 111, Inc. (NASDAQ:YI), AMC Entertainment Holdings Inc (NYSE:AMC), Banco BBVA Argentina S.A. (NYSE:BBAR), Clovis Oncology Inc (NASDAQ:CLVS), and Nautilus, Inc. (NYSE:NLS). This group of stocks’ market values resemble ODT’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
VRAY 11 108993 -1
CRNX 15 209097 -3
YI 4 7523 0
AMC 12 7804 4
BBAR 3 2782 -5
CLVS 15 69500 -3
NLS 17 86762 5
Average 11 70352 -0.4

View table here if you experience formatting issues.

As you can see these stocks had an average of 11 hedge funds with bullish positions and the average amount invested in these stocks was $70 million. That figure was $253 million in ODT’s case. Nautilus, Inc. (NYSE:NLS) is the most popular stock in this table. On the other hand Banco BBVA Argentina S.A. (NYSE:BBAR) is the least popular one with only 3 bullish hedge fund positions. Odonate Therapeutics, Inc. (NASDAQ:ODT) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for ODT is 86. 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. Hedge funds were also right about betting on ODT as the stock returned 15.2% since the end of Q3 (through 12/14) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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