Should You Buy MacroGenics Inc (MGNX)?

Reputable billionaire investors such as Nelson Peltz and David Tepper generate exorbitant profits for their wealthy accredited investors (a minimum of $1 million in investable assets would be required to invest in a hedge fund and most successful hedge funds won’t accept your savings unless you commit at least $5 million) by pinpointing winning small-cap stocks. There is little or no publicly-available information at all on some of these small companies, which makes it hard for an individual investor to pin down a winner within the small-cap space. However, hedge funds and other big asset managers can do the due diligence and analysis for you instead, thanks to their highly-skilled research teams and vast resources to conduct an appropriate evaluation process. Looking for potential winners within the small-cap galaxy of stocks? We believe following the smart money is a good starting point.

MacroGenics Inc (NASDAQ:MGNX) was in 21 hedge funds’ portfolios at the end of September. MacroGenics Inc (NASDAQ:MGNX) investors should be aware of an increase in activity from the world’s largest hedge funds in recent months. There were 20 hedge funds in our database with MacroGenics Inc (NASDAQ:MGNX) positions at the end of the previous quarter. At the end of this article, we will also compare MacroGenics Inc (NASDAQ:MGNX) to other stocks, including Hercules Technology Growth Capital Inc (NYSE:HTGC), Rofin-Sinar Technologies (NASDAQ:RSTI), and ADTRAN, Inc. (NASDAQ:ADTN) to get a better sense of its popularity.

To most market participants, hedge funds are seen as worthless, old financial vehicles of yesteryear. While there are over 8000 funds in operation today, our experts look at the crème de la crème of this group, approximately 700 funds. These hedge fund managers watch over the lion’s share of the hedge fund industry’s total capital, and by watching their unrivaled investments, Insider Monkey has brought to light a number of investment strategies that have historically exceeded the broader indices. Insider Monkey’s small-cap hedge fund strategy outrun the S&P 500 index by 12 percentage points per year for a decade in their back tests.

With all of this in mind, we’re going to view the recent action regarding MacroGenics Inc (NASDAQ:MGNX).

How have hedgies been trading MacroGenics Inc (NASDAQ:MGNX)?

Heading into Q4, a total of 21 of the hedge funds tracked by Insider Monkey were long this stock, an increase of 5% from one quarter earlier. With the smart money’s positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were boosting their stakes significantly (or already accumulated large positions).

Of the funds tracked by Insider Monkey, Point72 Asset Management, managed by Steve Cohen, holds the most valuable position in MacroGenics Inc (NASDAQ:MGNX). Point72 Asset Management has a $54.2 million position in the stock, comprising 0.4% of its 13F portfolio. On Point72 Asset Management’s heels is John Griffin of Blue Ridge Capital, with a $28.9 million position; 0.3% of its 13F portfolio is allocated to the stock. Remaining peers with similar optimism consist of Dmitry Balyasny’s Balyasny Asset Management, James E. Flynn’s Deerfield Management, and Tiger Management.

Now, key hedge funds have jumped into MacroGenics Inc (NASDAQ:MGNX) headfirst. Deerfield Management assembled the most outsized position in MacroGenics Inc (NASDAQ:MGNX). Deerfield Management had $11.9 million invested in the company at the end of the quarter. Paul Marshall and Ian Wace’s Marshall Wace LLP also initiated a $1 million position during the quarter. The other funds with new positions in the stock are Renaissance Technologies, Nathan Fischel’s DAFNA Capital Management, and Chao Ku’s Nine Chapters Capital Management.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as MacroGenics Inc (NASDAQ:MGNX) but similarly valued. These stocks are Hercules Technology Growth Capital Inc (NYSE:HTGC), Rofin-Sinar Technologies (NASDAQ:RSTI), ADTRAN, Inc. (NASDAQ:ADTN), and Luminex Corporation (NASDAQ:LMNX). This group of stocks’ market values is closest to MacroGenics Inc (NASDAQ:MGNX)’s market value.

As you can see, these stocks had an average of 16 hedge funds with bullish positions and the average amount invested in these stocks was $74 million. That figure was $163 million in MacroGenics Inc (NASDAQ:MGNX)’s case. Luminex Corporation (NASDAQ:LMNX) is the most popular stock in this table. On the other hand, ADTRAN, Inc. (NASDAQ:ADTN) is the least popular one with only 11 bullish hedge fund positions. MacroGenics Inc (NASDAQ:MGNX) is not the most popular stock in this group, but hedge fund interest is still above average. This is a slightly positive signal, but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard, Luminex Corporation (NASDAQ:LMNX) might be a better candidate to consider a long position.