Hedge Funds Have Never Been This Bullish On Nightstar Therapeutics plc (NITE)

Asma UL Husna

Sun, Jun 23, 2019, 6:52 PM

The 700+ hedge funds and famous money managers tracked by Insider Monkey have already compiled and submitted their 13F filings for the first quarter, which unveil their equity positions as of March 31. We went through these filings, fixed typos and other more significant errors and identified the changes in hedge fund portfolios. Our extensive review of these public filings is finally over, so this article is set to reveal the smart money sentiment towards Nightstar Therapeutics plc (NASDAQ:NITE).

Nightstar Therapeutics plc (NASDAQ:NITE) investors should be aware of an increase in hedge fund interest in recent months. Our calculations also showed that NITE isn't among the 30 most popular stocks among hedge funds.

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 market by 40 percentage points since May 2014 through May 30, 2019 (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.

We're going to analyze the new hedge fund action surrounding Nightstar Therapeutics plc (NASDAQ:NITE).

What does smart money think about Nightstar Therapeutics plc (NASDAQ:NITE)?

At the end of the first quarter, a total of 14 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 75% from one quarter earlier. By comparison, 7 hedge funds held shares or bullish call options in NITE a year ago. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Magnetar Capital was the largest shareholder of Nightstar Therapeutics plc (NASDAQ:NITE), with a stake worth $32.2 million reported as of the end of March. Trailing Magnetar Capital was Point72 Asset Management, which amassed a stake valued at $18.5 million. Beryl Capital Management, Alpine Associates, and Water Island Capital were also very fond of the stock, giving the stock large weights in their portfolios.

As aggregate interest increased, key hedge funds were leading the bulls' herd. Magnetar Capital, managed by Alec Litowitz and Ross Laser, established the largest position in Nightstar Therapeutics plc (NASDAQ:NITE). Magnetar Capital had $32.2 million invested in the company at the end of the quarter. David Alexander Witkin's Beryl Capital Management also initiated a $16.7 million position during the quarter. The other funds with brand new NITE positions are Robert Emil Zoellner's Alpine Associates, John Orrico's Water Island Capital, and Ben Levine, Andrew Manuel and Stefan Renold's LMR Partners.

Let's also examine hedge fund activity in other stocks similar to Nightstar Therapeutics plc (NASDAQ:NITE). These stocks are Omeros Corporation (NASDAQ:OMER), Controladora Vuela Compañía de Aviación, S.A.B. de C.V. (NYSE:VLRS), X Financial (NYSE:XYF), and Astec Industries, Inc. (NASDAQ:ASTE). This group of stocks' market values resemble NITE's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position OMER,6,98765,-1 VLRS,10,88125,3 XYF,2,4088,0 ASTE,11,79116,1 Average,7.25,67524,0.75 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 7.25 hedge funds with bullish positions and the average amount invested in these stocks was $68 million. That figure was $119 million in NITE's case. Astec Industries, Inc. (NASDAQ:ASTE) is the most popular stock in this table. On the other hand X Financial (NYSE:XYF) is the least popular one with only 2 bullish hedge fund positions. Compared to these stocks Nightstar Therapeutics plc (NASDAQ:NITE) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. Unfortunately NITE wasn't nearly as popular as these 20 stocks and hedge funds that were betting on NITE were disappointed as the stock returned 0.2% during the same 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 20 most popular stocks among hedge funds as 13 of these stocks already outperformed the market in Q2.

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

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