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Were Hedge Funds Right About Betting On G1 Therapeutics, Inc. (GTHX)?

The latest 13F reporting period has come and gone, and Insider Monkey have plowed through 821 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, a week after the market trough. Now, we are almost done with the second quarter. Investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned almost 20% this quarter. In this article you are going to find out whether hedge funds thoughtG1 Therapeutics, Inc. (NASDAQ:GTHX) was a good investment heading into the second quarter and how the stock traded in comparison to the top hedge fund picks.

G1 Therapeutics, Inc. (NASDAQ:GTHX) investors should pay attention to an increase in activity from the world’s largest hedge funds of late. GTHX was in 13 hedge funds’ portfolios at the end of the first quarter of 2020. There were 11 hedge funds in our database with GTHX positions at the end of the previous quarter. Our calculations also showed that GTHX 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.

Bruce Kovner, Caxton Associates LP

Bruce Kovner of Caxton Associates LP

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, we take a look at lists like the 10 largest silicon producing countries to identify emerging companies that are likely to deliver 1000% gains in the coming years. We interview hedge fund managers and ask them about their best ideas. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Now we’re going to check out the latest hedge fund action surrounding G1 Therapeutics, Inc. (NASDAQ:GTHX).

What have hedge funds been doing with G1 Therapeutics, Inc. (NASDAQ:GTHX)?

At Q1’s end, a total of 13 of the hedge funds tracked by Insider Monkey were long this stock, a change of 18% from the previous quarter. On the other hand, there were a total of 11 hedge funds with a bullish position in GTHX a year ago. With hedgies’ sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were boosting their stakes significantly (or already accumulated large positions).

Among these funds, Hillhouse Capital Management held the most valuable stake in G1 Therapeutics, Inc. (NASDAQ:GTHX), which was worth $10.5 million at the end of the third quarter. On the second spot was Burrage Capital Management which amassed $3.9 million worth of shares. Rhenman & Partners Asset Management, Tang Capital Management, and Millennium 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 Burrage Capital Management allocated the biggest weight to G1 Therapeutics, Inc. (NASDAQ:GTHX), around 3.83% of its 13F portfolio. Birchview Capital is also relatively very bullish on the stock, earmarking 0.39 percent of its 13F equity portfolio to GTHX.

As industrywide interest jumped, specific money managers were leading the bulls’ herd. Rhenman & Partners Asset Management, managed by Henrik Rhenman, initiated the most valuable position in G1 Therapeutics, Inc. (NASDAQ:GTHX). Rhenman & Partners Asset Management had $2.8 million invested in the company at the end of the quarter. D. E. Shaw’s D E Shaw also initiated a $0.6 million position during the quarter. The other funds with new positions in the stock are Mike Vranos’s Ellington, Bruce Kovner’s Caxton Associates LP, and Peter Algert and Kevin Coldiron’s Algert Coldiron Investors.

Let’s go over hedge fund activity in other stocks similar to G1 Therapeutics, Inc. (NASDAQ:GTHX). These stocks are Energy Recovery, Inc. (NASDAQ:ERII), BioSpecifics Technologies Corp. (NASDAQ:BSTC), First Community Bancshares Inc (NASDAQ:FCBC), and AxoGen, Inc. (NASDAQ:AXGN). This group of stocks’ market valuations resemble GTHX’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ERII 11 45757 4
BSTC 9 52752 -2
FCBC 5 8715 -2
AXGN 10 62386 -5
Average 8.75 42403 -1.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 8.75 hedge funds with bullish positions and the average amount invested in these stocks was $42 million. That figure was $26 million in GTHX’s case. Energy Recovery, Inc. (NASDAQ:ERII) is the most popular stock in this table. On the other hand First Community Bancshares Inc (NASDAQ:FCBC) is the least popular one with only 5 bullish hedge fund positions. Compared to these stocks G1 Therapeutics, Inc. (NASDAQ:GTHX) is more popular among hedge funds. 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 returned 13.3% in 2020 through June 25th but still managed to beat the market by 16.8 percentage points. Hedge funds were also right about betting on GTHX as the stock returned 121.1% so far in Q2 (through June 25th) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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