Where Do Hedge Funds Stand On MorphoSys AG (MOR)?

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 817 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 MorphoSys AG (NASDAQ:MOR).

Is MorphoSys AG (NASDAQ:MOR) a buy, sell, or hold? Investors who are in the know were taking a bearish view. The number of long hedge fund positions fell by 2 lately. MorphoSys AG (NASDAQ:MOR) was in 4 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistics is 9. Our calculations also showed that MOR isn’t among the 30 most popular stocks among hedge funds (click for Q3 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.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 66 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.

Ryan Tolkin, CIO of Schonfeld Strategic Advisors

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. With all of this in mind we’re going to take a look at the fresh hedge fund action encompassing MorphoSys AG (NASDAQ:MOR).

How are hedge funds trading MorphoSys AG (NASDAQ:MOR)?

At third quarter’s end, a total of 4 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -33% from the previous quarter. The graph below displays the number of hedge funds with bullish position in MOR over the last 21 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

According to Insider Monkey’s hedge fund database, Israel Englander’s Millennium Management has the largest position in MorphoSys AG (NASDAQ:MOR), worth close to $8.4 million, corresponding to less than 0.1%% of its total 13F portfolio. The second largest stake is held by Citadel Investment Group, led by Ken Griffin, holding a $3.3 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Remaining members of the smart money with similar optimism consist of Paul Marshall and Ian Wace’s Marshall Wace LLP, Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors and . In terms of the portfolio weights assigned to each position Marshall Wace LLP allocated the biggest weight to MorphoSys AG (NASDAQ:MOR), around 0.01% of its 13F portfolio. Millennium Management is also relatively very bullish on the stock, setting aside 0.01 percent of its 13F equity portfolio to MOR.

Seeing as MorphoSys AG (NASDAQ:MOR) has experienced a decline in interest from hedge fund managers, it’s easy to see that there lies a certain “tier” of funds who were dropping their positions entirely last quarter. It’s worth mentioning that Marc Schneidman’s Aquilo Capital Management dropped the largest stake of the “upper crust” of funds watched by Insider Monkey, worth an estimated $3 million in stock, and Renaissance Technologies was right behind this move, as the fund cut about $2.6 million worth. These moves are important to note, as total hedge fund interest dropped by 2 funds last quarter.

Let’s now review hedge fund activity in other stocks similar to MorphoSys AG (NASDAQ:MOR). These stocks are Essent Group Ltd (NYSE:ESNT), Meritage Homes Corp (NYSE:MTH), Neogen Corporation (NASDAQ:NEOG), CMC Materials, Inc. (NASDAQ:CCMP), Envestnet Inc (NYSE:ENV), Futu Holdings Limited (NASDAQ:FUTU), and Noble Energy, Inc. (NASDAQ:NBL). All of these stocks’ market caps match MOR’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ESNT 22 241956 -7
MTH 25 339658 -3
NEOG 18 43051 0
CCMP 15 120272 -8
ENV 25 165485 6
FUTU 15 102562 7
NBL 45 753639 7
Average 23.6 252375 0.3

View table here if you experience formatting issues.

As you can see these stocks had an average of 23.6 hedge funds with bullish positions and the average amount invested in these stocks was $252 million. That figure was $14 million in MOR’s case. Noble Energy, Inc. (NASDAQ:NBL) is the most popular stock in this table. On the other hand CMC Materials, Inc. (NASDAQ:CCMP) is the least popular one with only 15 bullish hedge fund positions. Compared to these stocks MorphoSys AG (NASDAQ:MOR) is even less popular than CCMP. Our overall hedge fund sentiment score for MOR is 16.3. 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. Hedge funds dodged a bullet by taking a bearish stance towards MOR. Our calculations showed that the top 20 most popular hedge fund stocks returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 30.7% in 2020 through November 27th but managed to beat the market again by 16.1 percentage points. Unfortunately MOR wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); MOR investors were disappointed as the stock returned -10.3% since the end of the third quarter (through 11/27) 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 most of these stocks already outperformed the market so far in 2020.

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