Is PBYI A Good Stock To Buy Now?

We at Insider Monkey have gone over 817 13F filings that hedge funds and prominent investors are required to file by the SEC The 13F filings show the funds’ and investors’ portfolio positions as of September 30th. In this article, we look at what those funds think of Puma Biotechnology Inc (NASDAQ:PBYI) based on that data.

Is PBYI a good stock to buy now? Puma Biotechnology Inc (NASDAQ:PBYI) has experienced a decrease in support from the world’s most elite money managers lately. Puma Biotechnology Inc (NASDAQ:PBYI) was in 17 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistic is 29. Our calculations also showed that PBYI 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.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 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.

William Leland Edwards of Palo Alto Investors

William Leland Edwards of Palo Alto Investors

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 we’re going to check out the fresh hedge fund action encompassing Puma Biotechnology Inc (NASDAQ:PBYI).

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

Heading into the fourth quarter of 2020, a total of 17 of the hedge funds tracked by Insider Monkey were long this stock, a change of -6% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in PBYI over the last 21 quarters. With hedge funds’ capital changing hands, there exists an “upper tier” of key hedge fund managers who were adding to their stakes significantly (or already accumulated large positions).

More specifically, Deerfield Management was the largest shareholder of Puma Biotechnology Inc (NASDAQ:PBYI), with a stake worth $28.5 million reported as of the end of September. Trailing Deerfield Management was Camber Capital Management, which amassed a stake valued at $25.8 million. Renaissance Technologies, Palo Alto Investors, and Tang Capital Management 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 Puma Biotechnology Inc (NASDAQ:PBYI), around 2.27% of its 13F portfolio. Camber Capital Management is also relatively very bullish on the stock, designating 1.36 percent of its 13F equity portfolio to PBYI.

Since Puma Biotechnology Inc (NASDAQ:PBYI) has faced declining sentiment from the aggregate hedge fund industry, we can see that there was a specific group of fund managers that elected to cut their full holdings in the third quarter. Intriguingly, John Overdeck and David Siegel’s Two Sigma Advisors sold off the biggest position of all the hedgies tracked by Insider Monkey, worth an estimated $2.2 million in stock, and David Harding’s Winton Capital Management was right behind this move, as the fund cut about $0.3 million worth. These transactions are important to note, as aggregate hedge fund interest dropped by 1 funds in the third quarter.

Let’s check out hedge fund activity in other stocks similar to Puma Biotechnology Inc (NASDAQ:PBYI). These stocks are Carriage Services, Inc. (NYSE:CSV), Voyager Therapeutics, Inc. (NASDAQ:VYGR), Jernigan Capital Inc (NYSE:JCAP), Prothena Corporation plc (NASDAQ:PRTA), Heritage Commerce Corp. (NASDAQ:HTBK), Donegal Group Inc (NASDAQ:DGICA), and FRP Holdings Inc (NASDAQ:FRPH). This group of stocks’ market caps are closest to PBYI’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CSV 11 39956 -1
VYGR 10 49897 -4
JCAP 9 27556 -3
PRTA 23 207482 -2
HTBK 12 16300 1
DGICA 7 11570 3
FRPH 9 31054 0
Average 11.6 54831 -0.9

View table here if you experience formatting issues.

As you can see these stocks had an average of 11.6 hedge funds with bullish positions and the average amount invested in these stocks was $55 million. That figure was $125 million in PBYI’s case. Prothena Corporation plc (NASDAQ:PRTA) is the most popular stock in this table. On the other hand Donegal Group Inc (NASDAQ:DGICA) is the least popular one with only 7 bullish hedge fund positions. Puma Biotechnology Inc (NASDAQ:PBYI) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for PBYI is 52.8. 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 positive signal but 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 30.7% in 2020 through December 14th and beat the market again by 15.8 percentage points. Unfortunately PBYI wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on PBYI were disappointed as the stock returned 8% since the end of September (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 many of these stocks already outperformed the market so far this year.

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