At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Portola Pharmaceuticals Inc (NASDAQ:PTLA).
Portola Pharmaceuticals Inc (NASDAQ:PTLA) investors should be aware of a decrease in support from the world’s most elite money managers recently. PTLA was in 17 hedge funds’ portfolios at the end of the first quarter of 2020. There were 27 hedge funds in our database with PTLA positions at the end of the previous quarter. Our calculations also showed that PTLA isn’t among the 30 most popular stocks among hedge funds (click for Q1 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 58 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 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
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. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let’s take a gander at the recent hedge fund action encompassing Portola Pharmaceuticals Inc (NASDAQ:PTLA).
How are hedge funds trading Portola Pharmaceuticals Inc (NASDAQ:PTLA)?
Heading into the second quarter of 2020, a total of 17 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -37% from the fourth quarter of 2019. On the other hand, there were a total of 20 hedge funds with a bullish position in PTLA a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Cadian Capital was the largest shareholder of Portola Pharmaceuticals Inc (NASDAQ:PTLA), with a stake worth $13.9 million reported as of the end of September. Trailing Cadian Capital was Rock Springs Capital Management, which amassed a stake valued at $12.5 million. Renaissance Technologies, Highland Capital Management, and D E Shaw 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 Highland Capital Management allocated the biggest weight to Portola Pharmaceuticals Inc (NASDAQ:PTLA), around 1.21% of its 13F portfolio. Cadian Capital is also relatively very bullish on the stock, dishing out 0.69 percent of its 13F equity portfolio to PTLA.
Due to the fact that Portola Pharmaceuticals Inc (NASDAQ:PTLA) has witnessed a decline in interest from the aggregate hedge fund industry, it’s safe to say that there exists a select few hedgies who sold off their full holdings last quarter. At the top of the heap, Phill Gross and Robert Atchinson’s Adage Capital Management said goodbye to the largest investment of the 750 funds tracked by Insider Monkey, comprising about $14.9 million in stock, and Jerome Pfund and Michael Sjostrom’s Sectoral Asset Management was right behind this move, as the fund sold off about $14.5 million worth. These transactions are important to note, as aggregate hedge fund interest fell by 10 funds last quarter.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Portola Pharmaceuticals Inc (NASDAQ:PTLA) but similarly valued. These stocks are Compugen Ltd. (NASDAQ:CGEN), Groupon Inc (NASDAQ:GRPN), IMAX Corporation (NYSE:IMAX), and First Defiance Financial (NASDAQ:FDEF). This group of stocks’ market valuations are similar to PTLA’s market valuation.
|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 13.25 hedge funds with bullish positions and the average amount invested in these stocks was $50 million. That figure was $61 million in PTLA’s case. Groupon Inc (NASDAQ:GRPN) is the most popular stock in this table. On the other hand Compugen Ltd. (NASDAQ:CGEN) is the least popular one with only 8 bullish hedge fund positions. Portola Pharmaceuticals Inc (NASDAQ:PTLA) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 13.4% in 2020 through June 22nd but still beat the market by 15.9 percentage points. Hedge funds were also right about betting on PTLA as the stock returned 152% in Q2 (through June 22nd) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.