ObsEva SA (OBSV) Is Burning These Hedge Funds

We are still in an overall bull market and many stocks that smart money investors were piling into surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Hedge funds’ top 3 stock picks returned 41.7% this year and beat the S&P 500 ETFs by 14 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like ObsEva SA (NASDAQ:OBSV).

Hedge fund interest in ObsEva SA (NASDAQ:OBSV) shares was flat at the end of last quarter. This is usually a negative indicator. At the end of this article we will also compare OBSV to other stocks including Lands’ End, Inc. (NASDAQ:LE), McDermott International, Inc. (NYSE:MDR), and Owens & Minor, Inc. (NYSE:OMI) to get a better sense of its popularity.
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

According to most market participants, hedge funds are assumed to be underperforming, old investment vehicles of yesteryear. While there are over 8000 funds in operation at present, Our experts look at the bigwigs of this group, around 750 funds. Most estimates calculate that this group of people direct the lion’s share of the smart money’s total asset base, and by monitoring their matchless picks, Insider Monkey has formulated numerous investment strategies that have historically outrun Mr. Market. Insider Monkey’s flagship short hedge fund strategy surpassed the S&P 500 short ETFs by around 20 percentage points per annum since its inception in May 2014. Our portfolio of short stocks lost 27.8% since February 2017 (through November 21st) even though the market was up more than 39% during the same period. We just shared a list of 7 short targets in our latest quarterly update .

Samuel Isaly Orbimed Advisors

Samuel Isaly of OrbiMed Advisors

We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds‘ buy/sell signals. We’re going to analyze the latest hedge fund action surrounding ObsEva SA (NASDAQ:OBSV).

How have hedgies been trading ObsEva SA (NASDAQ:OBSV)?

At Q3’s end, a total of 8 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in OBSV over the last 17 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in ObsEva SA (NASDAQ:OBSV) was held by OrbiMed Advisors, which reported holding $21.7 million worth of stock at the end of September. It was followed by Rock Springs Capital Management with a $11.3 million position. Other investors bullish on the company included Vivo Capital, Sectoral Asset Management, and Point72 Asset Management. In terms of the portfolio weights assigned to each position Sectoral Asset Management allocated the biggest weight to ObsEva SA (NASDAQ:OBSV), around 0.92% of its 13F portfolio. Vivo Capital is also relatively very bullish on the stock, dishing out 0.89 percent of its 13F equity portfolio to OBSV.

Earlier we told you that the aggregate hedge fund interest in the stock was unchanged and we view this as a negative development. Even though there weren’t any hedge funds dumping their holdings during the third quarter, there weren’t any hedge funds initiating brand new positions. This indicates that hedge funds, at the very best, perceive this stock as dead money and they haven’t identified any viable catalysts that can attract investor attention.

Let’s check out hedge fund activity in other stocks similar to ObsEva SA (NASDAQ:OBSV). These stocks are Lands’ End, Inc. (NASDAQ:LE), McDermott International, Inc. (NYSE:MDR), Owens & Minor, Inc. (NYSE:OMI), and Tecnoglass Inc. (NASDAQ:TGLS). This group of stocks’ market caps resemble OBSV’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
LE 12 69409 0
MDR 19 52301 -3
OMI 16 38684 3
TGLS 8 11898 3
Average 13.75 43073 0.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 13.75 hedge funds with bullish positions and the average amount invested in these stocks was $43 million. That figure was $49 million in OBSV’s case. McDermott International, Inc. (NYSE:MDR) is the most popular stock in this table. On the other hand Tecnoglass Inc. (NASDAQ:TGLS) is the least popular one with only 8 bullish hedge fund positions. Compared to these stocks ObsEva SA (NASDAQ:OBSV) is even less popular than TGLS. Hedge funds dodged a bullet by taking a bearish stance towards OBSV. Our calculations showed that the top 20 most popular hedge fund stocks returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately OBSV wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); OBSV investors were disappointed as the stock returned -45.4% during the fourth quarter (through the end of November) 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 70 percent of these stocks already outperformed the market so far in Q4.

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