Were These Hedge Funds Right About Loading Up On Moderna, Inc. (MRNA)?

Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that’s why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to smartest analysts and expensive data/information sources that individual investors can’t match. So should one consider investing in Moderna, Inc. (NASDAQ:MRNA)? The smart money sentiment can provide an answer to this question.

Is Moderna, Inc. (NASDAQ:MRNA) a buy, sell, or hold? Investors who are in the know were turning bullish. The number of long hedge fund bets improved by 12 lately. Moderna, Inc. (NASDAQ:MRNA) was in 37 hedge funds’ portfolios at the end of June. The all time high for this statistics is 25. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that MRNA isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks). There were 25 hedge funds in our database with MRNA holdings at the end of March. Video: Watch our video about the top 5 most popular hedge fund stocks.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 56 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 34% through August 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

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Charles Clough of Clough Capital Partners

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. 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. 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 website to get excerpts of these letters in your inbox. Keeping this in mind let’s take a look at the key hedge fund action regarding Moderna, Inc. (NASDAQ:MRNA).

At the end of the second quarter, a total of 37 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 48% from the previous quarter. The graph below displays the number of hedge funds with bullish position in MRNA over the last 20 quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were increasing their holdings meaningfully (or already accumulated large positions).

More specifically, Theleme Partners was the largest shareholder of Moderna, Inc. (NASDAQ:MRNA), with a stake worth $548.8 million reported as of the end of June. Trailing Theleme Partners was Balyasny Asset Management, which amassed a stake valued at $102.7 million. Citadel Investment Group, Millennium Management, and Balyasny 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 Theleme Partners allocated the biggest weight to Moderna, Inc. (NASDAQ:MRNA), around 25.9% of its 13F portfolio. Key Square Capital Management is also relatively very bullish on the stock, dishing out 5.62 percent of its 13F equity portfolio to MRNA.

With a general bullishness amongst the heavyweights, some big names were breaking ground themselves. Balyasny Asset Management, managed by Dmitry Balyasny, initiated the biggest position in Moderna, Inc. (NASDAQ:MRNA). Balyasny Asset Management had $30.9 million invested in the company at the end of the quarter. Phill Gross and Robert Atchinson’s Adage Capital Management also made a $20.9 million investment in the stock during the quarter. The following funds were also among the new MRNA investors: Simon Sadler’s Segantii Capital, Renaissance Technologies, and Charles Clough’s Clough Capital Partners.

Let’s now review hedge fund activity in other stocks similar to Moderna, Inc. (NASDAQ:MRNA). We will take a look at Motorola Solutions Inc (NYSE:MSI), V.F. Corporation (NYSE:VFC), Parker-Hannifin Corporation (NYSE:PH), Twitter Inc (NYSE:TWTR), Marvell Technology Group Ltd. (NASDAQ:MRVL), American Water Works Company, Inc. (NYSE:AWK), and XP Inc. (NASDAQ:XP). This group of stocks’ market valuations are similar to MRNA’s market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position MSI,36,535822,2 VFC,27,558958,8 PH,39,1172205,7 TWTR,68,1278023,13 MRVL,41,664690,12 AWK,30,653000,0 XP,21,430821,8 Average,37.4,756217,7.1 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 37.4 hedge funds with bullish positions and the average amount invested in these stocks was $756 million. That figure was $788 million in MRNA’s case. Twitter Inc (NYSE:TWTR) is the most popular stock in this table. On the other hand XP Inc. (NASDAQ:XP) is the least popular one with only 21 bullish hedge fund positions. Moderna, Inc. (NASDAQ:MRNA) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for MRNA is 57. 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 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 23% in 2020 through October 30th and surpassed the market again by 20.1 percentage points. Unfortunately MRNA wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); MRNA investors were disappointed as the stock returned 5.1% since the end of June (through 10/30) 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 most of these stocks already outperformed the market in 2020.

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

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