Molecular Templates, Inc. (MTEM) Fell Out Of Favor With Hedge Funds?

Out of thousands of stocks that are currently traded on the market, it is difficult to identify those that will really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of nearly 900 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has the potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about Molecular Templates, Inc. (NASDAQ:MTEM).

Hedge fund interest in Molecular Templates, Inc. (NASDAQ:MTEM) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that MTEM isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings). At the end of this article we will also compare MTEM to other stocks including Crossamerica Partners LP (NYSE:CAPL), HealthStream, Inc. (NASDAQ:HSTM), and Sigilon Therapeutics, Inc. (NASDAQ:SGTX) to get a better sense of its popularity.

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 206.8% since March 2017 and outperformed the S&P 500 ETFs by more than 115 percentage points (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Mark Kingdon - Kingdon Capital

Mark Kingdon of Kingdon Capital

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, pet market is growing at a 7% annual rate and is expected to reach $110 billion in 2021. So, we are checking out the 5 best stocks for animal lovers. We go through lists like the 15 best Jim Cramer stocks to identify the next Tesla that will deliver outsized returns. 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 homepage. Now let’s take a glance at the fresh hedge fund action regarding Molecular Templates, Inc. (NASDAQ:MTEM).

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

At first quarter’s end, a total of 20 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the fourth quarter of 2020. On the other hand, there were a total of 17 hedge funds with a bullish position in MTEM a year ago. With hedgies’ sentiment swirling, there exists a select group of key hedge fund managers who were upping their holdings substantially (or already accumulated large positions).

Among these funds, Biotechnology Value Fund / BVF Inc held the most valuable stake in Molecular Templates, Inc. (NASDAQ:MTEM), which was worth $36.1 million at the end of the fourth quarter. On the second spot was Frazier Healthcare Partners which amassed $17.3 million worth of shares. Woodline Partners, Kingdon Capital, and Adage 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 Endurant Capital Management allocated the biggest weight to Molecular Templates, Inc. (NASDAQ:MTEM), around 2.33% of its 13F portfolio. Frazier Healthcare Partners is also relatively very bullish on the stock, setting aside 1.39 percent of its 13F equity portfolio to MTEM.

Since Molecular Templates, Inc. (NASDAQ:MTEM) has experienced falling interest from the smart money, it’s easy to see that there lies a certain “tier” of hedgies who sold off their entire stakes last quarter. Intriguingly, Joseph Edelman’s Perceptive Advisors said goodbye to the biggest position of all the hedgies monitored by Insider Monkey, comprising close to $3.9 million in stock, and Fred Knoll’s Knoll Capital Management was right behind this move, as the fund said goodbye to about $1.1 million worth. These moves are intriguing to say the least, as total hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Molecular Templates, Inc. (NASDAQ:MTEM) but similarly valued. We will take a look at Crossamerica Partners LP (NYSE:CAPL), HealthStream, Inc. (NASDAQ:HSTM), Sigilon Therapeutics, Inc. (NASDAQ:SGTX), Rimini Street, Inc. (NASDAQ:RMNI), CIRCOR International, Inc. (NYSE:CIR), Ellington Financial Inc. (NYSE:EFC), and ChannelAdvisor Corp (NYSE:ECOM). This group of stocks’ market valuations are similar to MTEM’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CAPL 1 1095 0
HSTM 14 51904 0
SGTX 9 17809 -3
RMNI 16 302443 5
CIR 13 133159 3
EFC 6 38694 -3
ECOM 12 76490 -3
Average 10.1 88799 -0.1

View table here if you experience formatting issues.

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 $89 million. That figure was $130 million in MTEM’s case. Rimini Street, Inc. (NASDAQ:RMNI) is the most popular stock in this table. On the other hand Crossamerica Partners LP (NYSE:CAPL) is the least popular one with only 1 bullish hedge fund positions. Compared to these stocks Molecular Templates, Inc. (NASDAQ:MTEM) is more popular among hedge funds. Our overall hedge fund sentiment score for MTEM is 81.1. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 23.8% in 2021 through July 16th and still beat the market by 7.7 percentage points. Unfortunately MTEM wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on MTEM were disappointed as the stock returned -46.1% since the end of the first quarter (through 7/16) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market since 2019.

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