In this article you are going to find out whether hedge funds think Kinnate Biopharma Inc. (NASDAQ:KNTE) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It's not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.
Is KNTE a good stock to buy? Prominent investors were becoming less hopeful. The number of long hedge fund positions went down by 2 in recent months. Kinnate Biopharma Inc. (NASDAQ:KNTE) was in 16 hedge funds' portfolios at the end of March. The all time high for this statistic is 18. Our calculations also showed that KNTE isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings). There were 18 hedge funds in our database with KNTE positions at the end of the fourth quarter.
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 115 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.
Peter Kolchinsky of RA Capital Management
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Do Hedge Funds Think KNTE Is A Good Stock To Buy Now?
At the end of the first quarter, a total of 16 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -11% from one quarter earlier. On the other hand, there were a total of 0 hedge funds with a bullish position in KNTE a year ago. With hedgies' positions undergoing their usual ebb and flow, there exists an "upper tier" of key hedge fund managers who were adding to their holdings meaningfully (or already accumulated large positions).
According to Insider Monkey's hedge fund database, OrbiMed Advisors has the most valuable position in Kinnate Biopharma Inc. (NASDAQ:KNTE), worth close to $119.9 million, comprising 1.1% of its total 13F portfolio. The second most bullish fund manager is RA Capital Management, led by Peter Kolchinsky, holding a $112 million position; 1.7% of its 13F portfolio is allocated to the stock. Other peers that hold long positions encompass Andreas Halvorsen's Viking Global, Ken Griffin's Citadel Investment Group and Arsani William's Logos Capital. In terms of the portfolio weights assigned to each position Logos Capital allocated the biggest weight to Kinnate Biopharma Inc. (NASDAQ:KNTE), around 2.84% of its 13F portfolio. RA Capital Management is also relatively very bullish on the stock, designating 1.69 percent of its 13F equity portfolio to KNTE.
Seeing as Kinnate Biopharma Inc. (NASDAQ:KNTE) has faced a decline in interest from hedge fund managers, logic holds that there exists a select few hedgies who were dropping their entire stakes by the end of the first quarter. Interestingly, Israel Englander's Millennium Management said goodbye to the biggest position of the "upper crust" of funds watched by Insider Monkey, comprising close to $3.6 million in stock, and Paul Tudor Jones's Tudor Investment Corp was right behind this move, as the fund dumped about $1.6 million worth. These transactions are important to note, as aggregate hedge fund interest dropped by 2 funds by the end of the first quarter.
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Kinnate Biopharma Inc. (NASDAQ:KNTE) but similarly valued. We will take a look at Materion Corp (NYSE:MTRN), Score Media and Gaming Inc. (NASDAQ:SCR), COMPASS Pathways Plc (NASDAQ:CMPS), BJ's Restaurants, Inc. (NASDAQ:BJRI), ePlus Inc. (NASDAQ:PLUS), GreenTree Hospitality Group Ltd. (NYSE:GHG), and U.S. Physical Therapy, Inc. (NYSE:USPH). This group of stocks' market caps match KNTE's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position MTRN,17,108590,5 SCR,12,44339,12 CMPS,13,87585,-7 BJRI,11,97218,0 PLUS,11,39930,1 GHG,6,13392,-1 USPH,14,31493,2 Average,12,60364,1.7 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 12 hedge funds with bullish positions and the average amount invested in these stocks was $60 million. That figure was $428 million in KNTE's case. Materion Corp (NYSE:MTRN) is the most popular stock in this table. On the other hand GreenTree Hospitality Group Ltd. (NYSE:GHG) is the least popular one with only 6 bullish hedge fund positions. Kinnate Biopharma Inc. (NASDAQ:KNTE) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for KNTE is 75.1. 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 28.5% in 2021 through July 23rd and beat the market again by 10.1 percentage points. Unfortunately KNTE wasn't nearly as popular as these 5 stocks and hedge funds that were betting on KNTE were disappointed as the stock returned -29.4% since the end of March (through 7/23) 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.