In this article we will take a look at whether hedge funds think Enanta Pharmaceuticals Inc (NASDAQ:ENTA) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.
Is Enanta Pharmaceuticals Inc (NASDAQ:ENTA) the right pick for your portfolio? Prominent investors are in a pessimistic mood. The number of long hedge fund bets went down by 3 lately. Our calculations also showed that ENTA 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). ENTA was in 18 hedge funds' portfolios at the end of March. There were 21 hedge funds in our database with ENTA positions at the end of the previous quarter. 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 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 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.
[caption id="attachment_26575" align="aligncenter" width="400"] Louis Bacon Moore of Moore Capital[/caption]
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we're going to take a look at the key hedge fund action encompassing Enanta Pharmaceuticals Inc (NASDAQ:ENTA).
What have hedge funds been doing with Enanta Pharmaceuticals Inc (NASDAQ:ENTA)?
At Q1's end, a total of 18 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -14% from the previous quarter. The graph below displays the number of hedge funds with bullish position in ENTA over the last 18 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.
The largest stake in Enanta Pharmaceuticals Inc (NASDAQ:ENTA) was held by Farallon Capital, which reported holding $90 million worth of stock at the end of September. It was followed by Renaissance Technologies with a $45.3 million position. Other investors bullish on the company included Armistice Capital, Marshall Wace LLP, and GLG Partners. In terms of the portfolio weights assigned to each position Armistice Capital allocated the biggest weight to Enanta Pharmaceuticals Inc (NASDAQ:ENTA), around 1.81% of its 13F portfolio. Farallon Capital is also relatively very bullish on the stock, earmarking 0.79 percent of its 13F equity portfolio to ENTA.
Because Enanta Pharmaceuticals Inc (NASDAQ:ENTA) has experienced falling interest from the smart money, it's safe to say that there lies a certain "tier" of hedgies who were dropping their full holdings heading into Q4. Interestingly, Louis Bacon's Moore Global Investments cut the biggest position of the "upper crust" of funds monitored by Insider Monkey, comprising about $4.4 million in stock. Minhua Zhang's fund, Weld Capital Management, also dropped its stock, about $0.8 million worth. These transactions are important to note, as total hedge fund interest fell by 3 funds heading into Q4.
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Enanta Pharmaceuticals Inc (NASDAQ:ENTA) but similarly valued. We will take a look at John B. Sanfilippo & Son, Inc. (NASDAQ:JBSS), SITE Centers Corp. (NYSE:SITC), Grupo Financiero Galicia S.A. (NASDAQ:GGAL), and Calavo Growers, Inc. (NASDAQ:CVGW). This group of stocks' market valuations are closest to ENTA's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position JBSS,14,63220,-3 SITC,21,47296,-1 GGAL,6,12134,-2 CVGW,11,63039,-12 Average,13,46422,-4.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 13 hedge funds with bullish positions and the average amount invested in these stocks was $46 million. That figure was $217 million in ENTA's case. SITE Centers Corp. (NYSE:SITC) is the most popular stock in this table. On the other hand Grupo Financiero Galicia S.A. (NASDAQ:GGAL) is the least popular one with only 6 bullish hedge fund positions. Enanta Pharmaceuticals Inc (NASDAQ:ENTA) is not the most popular stock in this group but hedge fund interest is still above average. 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 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 gained 13.4% in 2020 through June 22nd but beat the market by 15.9 percentage points. Unfortunately ENTA wasn't nearly as popular as these 10 stocks and hedge funds that were betting on ENTA were disappointed as the stock returned -1.8% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.