Is Idera Pharmaceuticals Inc (NASDAQ:IDRA) a good place to invest some of your money right now? We can gain invaluable insight to help us answer that question by studying the investment trends of top investors, who employ world-class Ivy League graduates, who are given immense resources and industry contacts to put their financial expertise to work. The top picks of these firms have historically outperformed the market when we account for known risk factors, making them very valuable investment ideas.
Is Idera Pharmaceuticals (IDRA) a good stock to buy now? Idera investors should pay attention to an increase in hedge fund sentiment lately. Idera Pharmaceuticals Inc (NASDAQ:IDRA) was in 7 hedge funds' portfolios at the end of the third quarter of 2020. The all time high for this statistics is 17. Our calculations also showed that IDRA 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.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's monthly stock picks returned 113% since March 2017 and outperformed the S&P 500 ETFs by more than 66 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Chuck Royce
Chuck Royce of Royce & Associates
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 15 best blue chip stocks 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. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Now let's take a peek at the latest hedge fund action encompassing Idera Pharmaceuticals Inc (NASDAQ:IDRA).
Hedge fund activity in Idera Pharmaceuticals Inc (NASDAQ:IDRA)
At the end of September, a total of 7 of the hedge funds tracked by Insider Monkey were long this stock, a change of 17% from the previous quarter. By comparison, 9 hedge funds held shares or bullish call options in IDRA 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.
Is IDRA A Good Stock To Buy?
More specifically, Baker Bros. Advisors was the largest shareholder of Idera Pharmaceuticals Inc (NASDAQ:IDRA), with a stake worth $9.9 million reported as of the end of September. Trailing Baker Bros. Advisors was Renaissance Technologies, which amassed a stake valued at $2.1 million. Millennium Management, Palo Alto Investors, and Royce & Associates 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 Baker Bros. Advisors allocated the biggest weight to Idera Pharmaceuticals Inc (NASDAQ:IDRA), around 0.04% of its 13F portfolio. Palo Alto Investors is also relatively very bullish on the stock, dishing out 0.01 percent of its 13F equity portfolio to IDRA.
As industrywide interest jumped, specific money managers have been driving this bullishness. Citadel Investment Group, managed by Ken Griffin, established the most valuable position in Idera Pharmaceuticals Inc (NASDAQ:IDRA). Citadel Investment Group had $0 million invested in the company at the end of the quarter.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Idera Pharmaceuticals Inc (NASDAQ:IDRA) but similarly valued. These stocks are Rockwell Medical Inc (NASDAQ:RMTI), First Eagle Alternative Capital BDC, Inc. (NASDAQ:FCRD), Galmed Pharmaceuticals Ltd (NASDAQ:GLMD), Armstrong Flooring, Inc. (NYSE:AFI), Consumer Portfolio Services, Inc. (NASDAQ:CPSS), Issuer Direct Corporation (NYSE:ISDR), and Kitov Pharma Ltd. (NASDAQ:KTOV). This group of stocks' market caps are similar to IDRA's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position RMTI,4,4228,0 FCRD,6,9332,0 GLMD,7,15667,-1 AFI,12,23266,-3 CPSS,1,1379,0 ISDR,3,1574,0 KTOV,2,1528,-1 Average,5,8139,-0.7 [/table]
As you can see these stocks had an average of 5 hedge funds with bullish positions and the average amount invested in these stocks was $8 million. That figure was $13 million in IDRA's case. Armstrong Flooring, Inc. (NYSE:AFI) is the most popular stock in this table. On the other hand Consumer Portfolio Services, Inc. (NASDAQ:CPSS) is the least popular one with only 1 bullish hedge fund positions. Idera Pharmaceuticals Inc (NASDAQ:IDRA) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for IDRA is 45.6. 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. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 31.6% in 2020 through December 2nd and still beat the market by 16 percentage points. Hedge funds were also right about betting on IDRA as the stock returned 142.1% since the end of Q3 (through 12/2) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.
