Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed in recent years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets hoping that they will outperform the broader market. Our research shows that certain hedge funds do have great stock picking skills (and we can identify these hedge funds in advance pretty accurately), so let’s take a glance at the smart money sentiment towards Stealth BioTherapeutics Corp (NASDAQ:MITO).
Stealth BioTherapeutics Corp (NASDAQ:MITO) shares haven't seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 4 hedge funds' portfolios at the end of September. Our calculations also showed that MITO 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). The level and the change in hedge fund popularity aren't the only variables you need to analyze to decipher hedge funds' perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That's why at the end of this article we will examine companies such as Exantas Capital Corp. (NYSE:XAN), ClearSign Technologies Corporation (NASDAQ:CLIR), and Novan, Inc. (NASDAQ:NOVN) to gather more data points.
Video: Watch our video about the top 5 most popular hedge fund stocks.
To the average investor there are several tools stock market investors can use to appraise publicly traded companies. Two of the less known tools are hedge fund and insider trading signals. Our experts have shown that, historically, those who follow the top picks of the top investment managers can outperform the market by a solid margin (see the details here).
CITADEL INVESTMENT GROUP
Ken Griffin of Citadel Investment Group
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 go over the fresh hedge fund action surrounding Stealth BioTherapeutics Corp (NASDAQ:MITO).
Hedge fund activity in Stealth BioTherapeutics Corp (NASDAQ:MITO)
At the end of the third quarter, a total of 4 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards MITO over the last 21 quarters. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
When looking at the institutional investors followed by Insider Monkey, Lawrence Hawkins's Prosight Capital has the largest position in Stealth BioTherapeutics Corp (NASDAQ:MITO), worth close to $0.3 million, comprising 0.2% of its total 13F portfolio. Coming in second is Renaissance Technologies, which holds a $0.1 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Other professional money managers that are bullish contain Neil Shahrestani's Ikarian Capital, Ken Griffin's Citadel Investment Group and . In terms of the portfolio weights assigned to each position Prosight Capital allocated the biggest weight to Stealth BioTherapeutics Corp (NASDAQ:MITO), around 0.16% of its 13F portfolio. Ikarian Capital is also relatively very bullish on the stock, setting aside 0.0036 percent of its 13F equity portfolio to MITO.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Millennium Management. One hedge fund selling its entire position doesn't always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don't think this is the case in this case because only one of the 800+ hedge funds tracked by Insider Monkey identified as a viable investment and initiated a position in the stock (that fund was Citadel Investment Group).
Let's check out hedge fund activity in other stocks similar to Stealth BioTherapeutics Corp (NASDAQ:MITO). These stocks are Exantas Capital Corp. (NYSE:XAN), ClearSign Technologies Corporation (NASDAQ:CLIR), Novan, Inc. (NASDAQ:NOVN), Navios Maritime Partners L.P. (NYSE:NMM), Perceptron, Inc. (NASDAQ:PRCP), Nephros, Inc. (NASDAQ:NEPH), and Cyren Ltd (NASDAQ:CYRN). All of these stocks' market caps are closest to MITO's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position XAN,9,3740,-4 CLIR,1,183,-1 NOVN,2,75,0 NMM,1,320,-1 PRCP,11,16030,5 NEPH,4,26727,-1 CYRN,3,3226,-1 Average,4.4,7186,-0.4 [/table]
As you can see these stocks had an average of 4.4 hedge funds with bullish positions and the average amount invested in these stocks was $7 million. That figure was $1 million in MITO's case. Perceptron, Inc. (NASDAQ:PRCP) is the most popular stock in this table. On the other hand ClearSign Technologies Corporation (NASDAQ:CLIR) is the least popular one with only 1 bullish hedge fund positions. Stealth BioTherapeutics Corp (NASDAQ:MITO) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for MITO is 50. 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. This is a slightly negative signal and we'd rather spend our time researching stocks that hedge funds are piling on. 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 30.7% in 2020 through November 27th and surpassed the market again by 16.1 percentage points. Unfortunately MITO wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); MITO investors were disappointed as the stock returned -3% since the end of September (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 in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.
