The Insider Monkey team has completed processing the quarterly 13F filings for the September quarter submitted by the hedge funds and other money managers included in our extensive database. Most hedge fund investors experienced strong gains on the back of a strong market performance, which certainly propelled them to adjust their equity holdings so as to maintain the desired risk profile. As a result, the relevancy of these public filings and their content is indisputable, as they may reveal numerous high-potential stocks. The following article will discuss the smart money sentiment towards Spero Therapeutics, Inc. (NASDAQ:SPRO).
Is SPRO a good stock to buy now? Spero Therapeutics, Inc. (NASDAQ:SPRO) shareholders have witnessed an increase in hedge fund sentiment in recent months. Spero Therapeutics, Inc. (NASDAQ:SPRO) was in 12 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistics is 8. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that SPRO 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. Now let’s take a look at the recent hedge fund action regarding Spero Therapeutics, Inc. (NASDAQ:SPRO).
Do Hedge Funds Think SPRO Is A Good Stock To Buy Now?
At the end of September, a total of 12 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 50% from one quarter earlier. By comparison, 7 hedge funds held shares or bullish call options in SPRO a year ago. With hedge funds’ positions undergoing their usual ebb and flow, there exists an “upper tier” of notable hedge fund managers who were boosting their stakes significantly (or already accumulated large positions).
Among these funds, Aquilo Capital Management held the most valuable stake in Spero Therapeutics, Inc. (NASDAQ:SPRO), which was worth $50.2 million at the end of the third quarter. On the second spot was Biotechnology Value Fund / BVF Inc which amassed $15 million worth of shares. Rock Springs Capital Management, Samsara BioCapital, and Renaissance Technologies 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 Aquilo Capital Management allocated the biggest weight to Spero Therapeutics, Inc. (NASDAQ:SPRO), around 5.31% of its 13F portfolio. Biotechnology Value Fund / BVF Inc is also relatively very bullish on the stock, setting aside 0.82 percent of its 13F equity portfolio to SPRO.
Now, key hedge funds have been driving this bullishness. Samsara BioCapital, managed by Srini Akkaraju and Michael Dybbs, established the largest position in Spero Therapeutics, Inc. (NASDAQ:SPRO). Samsara BioCapital had $1.8 million invested in the company at the end of the quarter. Anand Parekh’s Alyeska Investment Group also made a $1.1 million investment in the stock during the quarter. The other funds with new positions in the stock are Nathan Fischel’s DAFNA Capital Management and Ken Griffin’s Citadel Investment Group.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Spero Therapeutics, Inc. (NASDAQ:SPRO) but similarly valued. These stocks are Kimball Electronics Inc (NASDAQ:KE), Casper Sleep Inc. (NYSE:CSPR), Genco Shipping & Trading Limited (NYSE:GNK), CURO Group Holdings Corp. (NYSE:CURO), Cheetah Mobile Inc (NYSE:CMCM), MidWestOne Financial Group, Inc. (NASDAQ:MOFG), and SCVX Corp. (NYSE:SCVX). All of these stocks’ market caps are similar to SPRO’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
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As you can see these stocks had an average of 10.1 hedge funds with bullish positions and the average amount invested in these stocks was $41 million. That figure was $87 million in SPRO’s case. SCVX Corp. (NYSE:SCVX) is the most popular stock in this table. On the other hand Cheetah Mobile Inc (NYSE:CMCM) is the least popular one with only 4 bullish hedge fund positions. Spero Therapeutics, Inc. (NASDAQ:SPRO) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for SPRO is 69.8. 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. 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. Hedge funds were also right about betting on SPRO as the stock returned 61.2% since the end of Q3 (through 12/8) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.