Were Hedge Funds Right About Piling Into IGM Biosciences, Inc. (IGMS)?

·6 min read

The Insider Monkey team has completed processing the quarterly 13F filings for the March quarter submitted by the hedge funds and other money managers included in our extensive database. Most hedge fund investors experienced strong gains on the back of a strong market performance, which certainly propelled them to adjust their equity holdings so as to maintain the desired risk profile. As a result, the relevancy of these public filings and their content is indisputable, as they may reveal numerous high-potential stocks. The following article will discuss the smart money sentiment towards IGM Biosciences, Inc. (NASDAQ:IGMS).

IGM Biosciences, Inc. (NASDAQ:IGMS) shares haven't seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 18 hedge funds' portfolios at the end of March. Our calculations also showed that IGMS isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings). 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 Forward Air Corporation (NASDAQ:FWRD), Golub Capital BDC Inc (NASDAQ:GBDC), and Amarin Corporation plc (NASDAQ:AMRN) to gather more data points.

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. Hedge funds have more than $3.5 trillion in assets under management, so you can't expect their entire portfolios to beat the market by large margins. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 115 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds' moves today.

Peter Kolchinsky of RA Capital Management

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, pet market is growing at a 7% annual rate and is expected to reach $110 billion in 2021. So, we are checking out the 5 best stocks for animal lovers. We go through lists like the 15 best Jim Cramer stocks to identify the next Tesla that will deliver outsized returns. 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 homepage. With all of this in mind let's take a glance at the key hedge fund action encompassing IGM Biosciences, Inc. (NASDAQ:IGMS).

Do Hedge Funds Think IGMS Is A Good Stock To Buy Now?

Heading into the second quarter of 2021, a total of 18 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the previous quarter. On the other hand, there were a total of 14 hedge funds with a bullish position in IGMS 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 IGMS A Good Stock To Buy?
Is IGMS A Good Stock To Buy?

More specifically, Redmile Group was the largest shareholder of IGM Biosciences, Inc. (NASDAQ:IGMS), with a stake worth $262.7 million reported as of the end of March. Trailing Redmile Group was Baker Bros. Advisors, which amassed a stake valued at $242 million. Alkeon Capital Management, RA Capital Management, and Cormorant Asset Management 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 Redmile Group allocated the biggest weight to IGM Biosciences, Inc. (NASDAQ:IGMS), around 3.7% of its 13F portfolio. RA Capital Management is also relatively very bullish on the stock, designating 1.14 percent of its 13F equity portfolio to IGMS.

Seeing as IGM Biosciences, Inc. (NASDAQ:IGMS) has experienced falling interest from the smart money, it's safe to say that there is a sect of money managers that elected to cut their positions entirely heading into Q2. Intriguingly, Arsani William's Logos Capital cut the biggest investment of all the hedgies tracked by Insider Monkey, valued at about $13.2 million in stock, and John W. Rende's Copernicus Capital Management was right behind this move, as the fund said goodbye to about $0.4 million worth. These transactions are interesting, as total hedge fund interest stayed the same (this is a bearish signal in our experience).

Let's check out hedge fund activity in other stocks similar to IGM Biosciences, Inc. (NASDAQ:IGMS). We will take a look at Forward Air Corporation (NASDAQ:FWRD), Golub Capital BDC Inc (NASDAQ:GBDC), Amarin Corporation plc (NASDAQ:AMRN), Gentherm Inc (NASDAQ:THRM), Essential Properties Realty Trust, Inc. (NYSE:EPRT), Shenandoah Telecommunications Company (NASDAQ:SHEN), and Pactiv Evergreen Inc. (NASDAQ:PTVE). This group of stocks' market caps resemble IGMS's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position FWRD,13,285958,2 GBDC,15,47180,0 AMRN,22,444225,-2 THRM,13,113507,0 EPRT,5,7692,-2 SHEN,8,98015,3 PTVE,9,92205,2 Average,12.1,155540,0.4 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 12.1 hedge funds with bullish positions and the average amount invested in these stocks was $156 million. That figure was $759 million in IGMS's case. Amarin Corporation plc (NASDAQ:AMRN) is the most popular stock in this table. On the other hand Essential Properties Realty Trust, Inc. (NYSE:EPRT) is the least popular one with only 5 bullish hedge fund positions. IGM Biosciences, Inc. (NASDAQ:IGMS) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for IGMS is 73.2. 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 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 still beat the market by 10.1 percentage points. Hedge funds were also right about betting on IGMS, though not to the same extent, as the stock returned 11.7% since Q1 (through July 23rd) and outperformed the market as well.

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Disclosure: None. This article was originally published at Insider Monkey.

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