At Insider Monkey, we pore over the filings of nearly 873 top investment firms every quarter, a process we have now completed for the latest reporting period. The data we've gathered as a result gives us access to a wealth of collective knowledge based on these firms' portfolio holdings as of June 30th. In this article, we will use that wealth of knowledge to determine whether or not Protagonist Therapeutics, Inc. (NASDAQ:PTGX) makes for a good investment right now.
Is Protagonist Therapeutics, Inc. (NASDAQ:PTGX) an exceptional stock to buy now? The best stock pickers were taking a bullish view. The number of long hedge fund bets rose by 7 in recent months. Protagonist Therapeutics, Inc. (NASDAQ:PTGX) was in 27 hedge funds' portfolios at the end of June. The all time high for this statistic was previously 23. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that PTGX isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings).
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 79 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.
James E. Flynn of Deerfield Management
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Do Hedge Funds Think PTGX Is A Good Stock To Buy Now?
At Q2's end, a total of 27 of the hedge funds tracked by Insider Monkey were long this stock, a change of 35% from the first quarter of 2020. On the other hand, there were a total of 11 hedge funds with a bullish position in PTGX a year ago. With hedgies' capital changing hands, there exists a few notable hedge fund managers who were adding to their stakes substantially (or already accumulated large positions).
The largest stake in Protagonist Therapeutics, Inc. (NASDAQ:PTGX) was held by Biotechnology Value Fund / BVF Inc, which reported holding $168.5 million worth of stock at the end of June. It was followed by Consonance Capital Management with a $154.7 million position. Other investors bullish on the company included Farallon Capital, Deerfield Management, and Point72 Asset Management. In terms of the portfolio weights assigned to each position Consonance Capital Management allocated the biggest weight to Protagonist Therapeutics, Inc. (NASDAQ:PTGX), around 18.62% of its 13F portfolio. Tri Locum Partners is also relatively very bullish on the stock, designating 7.64 percent of its 13F equity portfolio to PTGX.
As one would reasonably expect, key hedge funds were leading the bulls' herd. Pinz Capital, managed by Matthew L Pinz, assembled the most outsized position in Protagonist Therapeutics, Inc. (NASDAQ:PTGX). Pinz Capital had $8.8 million invested in the company at the end of the quarter. Greg Martinez's Parkman Healthcare Partners also initiated a $5.8 million position during the quarter. The other funds with brand new PTGX positions are Brian Ashford-Russell and Tim Woolley's Polar Capital, Brian Sheehy's Iszo Capital, and Andre F. Perold's HighVista Strategies.
Let's also examine hedge fund activity in other stocks similar to Protagonist Therapeutics, Inc. (NASDAQ:PTGX). We will take a look at Monro Inc (NASDAQ:MNRO), Hostess Brands, Inc. (NASDAQ:TWNK), Virtus Investment Partners Inc (NASDAQ:VRTS), B&G Foods, Inc. (NYSE:BGS), Deciphera Pharmaceuticals, Inc. (NASDAQ:DCPH), Realogy Holdings Corp (NYSE:RLGY), and Revance Therapeutics Inc (NASDAQ:RVNC). This group of stocks' market caps resemble PTGX's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position MNRO,10,25340,-2 TWNK,32,438884,-2 VRTS,21,165409,1 BGS,10,10330,0 DCPH,23,568335,0 RLGY,18,277899,-4 RVNC,12,153216,2 Average,18,234202,-0.7 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 18 hedge funds with bullish positions and the average amount invested in these stocks was $234 million. That figure was $724 million in PTGX's case. Hostess Brands, Inc. (NASDAQ:TWNK) is the most popular stock in this table. On the other hand Monro Inc (NASDAQ:MNRO) is the least popular one with only 10 bullish hedge fund positions. Protagonist Therapeutics, Inc. (NASDAQ:PTGX) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for PTGX is 78.6. 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. This is a slightly positive signal but we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 24.9% in 2021 through October 15th and beat the market again by 4.5 percentage points. Unfortunately PTGX wasn't nearly as popular as these 5 stocks and hedge funds that were betting on PTGX were disappointed as the stock returned -31% since the end of June (through 10/15) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.
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Disclosure: None. This article was originally published at Insider Monkey.