Is Mersana Therapeutics, Inc. (MRSN) a good stock to buy?
As the market is dragged down by short-term sentiment influenced by the accommodative US interest rate environment, virus news and stimulus spending, many smart investors are starting to be cautious about the current uptrend since March 2020 and to hedge or reduce many of their long positions. Some fund managers bet on the Dow Jones reaching 40,000 to generate solid returns. However, as we know, big investors usually buy stocks with strong fundamentals that can deliver gains in both bullish and bearish markets, which is why we believe we can profit from emulating them. In this article, we’ll take a look at the feeling of smart money that surrounds Mersana Therapeutics, Inc. (NASDAQ:MRSN).
Is MRSN a good stock to buy? Fund managers were in a bearish mood. The number of long positions in hedge funds has fallen by 5 recently. Mersana Therapeutics, Inc. (NASDAQ:MRSN) was in 25 hedge fund portfolios at the end of March. The all-time high for this statistic is 30. Our calculations have also shown that MRSN is not among the 30 most popular stocks among hedge funds (click for Q1 ranking). There were 30 hedge funds in our database with MRSN positions at the end of the fourth quarter.
So why do we pay attention to hedge fund sentiment before making investment decisions? Our research has shown that small cap hedge fund stock selection managed to beat the market by double digits every year between 1999 and 2016, but the margin for outperformance has shrunk in recent years. Nonetheless, we were still able to identify in advance a select group of hedge funds that have outperformed S&P 500 ETFs by more than 115 percentage points since March 2017 (see details here). We have been able to outperform passive index funds by tracking corporate and hedge fund insider movements, and we believe small investors can benefit greatly from reading hedge fund investor letters and 13F records. .
Daniel Gold of QVT Financial
At Insider Monkey, we scour multiple sources to uncover the next big investing idea. For example, economists warn of a spike in inflation. So we check that backdoor golden game which peaked at 718% in just over a year. We go through lists like the 10 best stocks of batteries to choose the next Tesla which will offer a 10x return. Even though we only recommend positions in a tiny fraction of the companies we analyze, we check as many stocks as possible. We read letters from hedge fund investors and listen to equity pitches at hedge fund conferences. You can subscribe to our free daily newsletter at our home page. With all of that in mind, let’s take a look at the new hedge fund action surrounding Mersana Therapeutics, Inc. (NASDAQ:MRSN).
Do hedge funds think MRSN is a good stock to buy now?
Heading into the second quarter of 2021, a total of 25 of the hedge funds tracked by Insider Monkey were long on this stock, a change of -17% from the previous quarter. By comparison, 17 hedge funds held stocks or bullish call options in MRSN a year ago. So let’s take a look at which hedge funds were among the top stock holders and which hedge funds were making big moves.
Based on publicly available data on hedge funds and institutional investors compiled by Insider Monkey, Behzad Aghazadeh’s company Avoro Capital Advisors (venBio Select Advisor) holds the largest position in Mersana Therapeutics, Inc. (NASDAQ: MRSN), worth nearly $ 110 million, or 1.9% of its total 13F portfolio. The second most optimistic fund manager is Alex Denner of Sarissa Capital Management, with a position of $ 64.8 million; the fund has 6.2% of its 13F portfolio invested in the stock. Some other professional fund managers with similar optimism are Kris Jenner, Gordon Bussard, Graham McPhail’s Rock Springs Capital Management, OrbiMed Advisors and Panayotis Takis Sparaggis Alkeon Capital Management. In terms of the portfolio weights assigned to each position, Sarissa Capital Management assigned the largest weight to Mersana Therapeutics, Inc. (NASDAQ: MRSN), approximately 6.21% of its 13F portfolio. Commodore Capital is also relatively very bullish on the stock, allocating 2.73% of its 13F equity portfolio to MRSN.
Because Mersana Therapeutics, Inc. (NASDAQ: MRSN) has witnessed a drop in sentiment in the overall hedge fund industry, we can see that there is a cult of fund managers who have decided to sell all of the hedge fund industry. of their holdings by the end of the first quarter. Interestingly, Mitchell Blutt Consonance Capital Management relinquished the largest position in the “top crust” of funds, followed by Insider Monkey, totaling about $ 37.3 million in shares. the Jeffrey Jay and David Kroin fonds, Grand Point Partners, also sold its shares, valued at around $ 13 million. These moves are important to note, as total hedge fund interest was reduced by 5 funds at the end of the first quarter.
Let’s review hedge fund activity in other stocks – not necessarily in the same industry as Mersana Therapeutics, Inc. (NASDAQ: MRSN) but of similar value. These shares are Enerplus Corp (NYSE:IRON), Dynavax Technologies Corporation (NASDAQ:DVAX), SecureWorks Corp. (NASDAQ:SCWX), Brookdale Senior Living, Inc. (NYSE:BKD), Avid Bioservices, Inc. (NASDAQ:CDMO), NOW Inc (NYSE:DNOW) and Community Healthcare Trust Inc (NYSE:CHCT). The market value of this group of shares corresponds to the market value of MRSN.
[table] Ticker, number of HF with positions, total value of HF positions (x1000), change of HF ERF position, 19.145392.2 DVAX, 14.81307.0 SCWX, 12.20191.1 BKD, 23.386290.4 CDMO , 21,140924, -4 DNOW, 18,117523, -4 CHCT, 14,81537,2 Average, 17,3,139023,0.1 [/table]
See the table here if you have formatting problems.
As you can see, these stocks had an average of 17.3 hedge funds with bullish positions and the average amount invested in these stocks was $ 139 million. That figure was $ 358 million in the case of MRSN. Brookdale Senior Living, Inc. (NYSE:BKD) is the most popular action in this table. On the other hand, SecureWorks Corp. (NASDAQ:SCWX) is the least popular with only 12 bullish hedge fund positions. Compared to these stocks, Mersana Therapeutics, Inc. (NASDAQ: MRSN) is more popular among hedge funds. Our overall hedge fund sentiment score for MRSN is 75. Stocks with a 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 have shown 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 24% in 2021 through July 9 and have consistently beaten the market by 6.7 percentage points. Unfortunately, MRSN was not as popular as these 5 stocks and the hedge funds that bet on MRSN were disappointed as the stock returned -20.4% since the end of the first quarter (through 7/9) and underperformed the market. If you want to invest in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds, as most of these stocks have already outperformed the market since 2019.
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Disclosure: none. This article originally appeared on Monkey initiate.