At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (see why hell is coming). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Regenxbio Inc (NASDAQ:RGNX) at the end of the first quarter and determine whether the smart money was really smart about this stock.
Hedge fund interest in Regenxbio Inc (NASDAQ:RGNX) shares was flat at the end of last quarter. This is usually a negative indicator. At the end of this article we will also compare RGNX to other stocks including Veracyte Inc (NASDAQ:VCYT), Cinemark Holdings, Inc. (NYSE:CNK), and BMC Stock Holdings, Inc. (NASDAQ:BMCH) to get a better sense of its popularity.
Video: Watch our video about the top 5 most popular hedge fund stocks.
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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 58 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 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Lei Zhang of Hillhouse Capital Management
At Insider Monkey we scour multiple sources to uncover the next great investment idea. Cannabis stocks are roaring back in 2020, so we are checking out this under-the-radar 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. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. Now let’s take a peek at the latest hedge fund action surrounding Regenxbio Inc (NASDAQ:RGNX).
What have hedge funds been doing with Regenxbio Inc (NASDAQ:RGNX)?
At Q1’s end, a total of 19 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the previous quarter. The graph below displays the number of hedge funds with bullish position in RGNX over the last 18 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Of the funds tracked by Insider Monkey, Jeremy Green’s Redmile Group has the most valuable position in Regenxbio Inc (NASDAQ:RGNX), worth close to $75.7 million, amounting to 2.1% of its total 13F portfolio. On Redmile Group’s heels is Water Street Capital, led by Gilchrist Berg, holding a $20.6 million position; the fund has 2.2% of its 13F portfolio invested in the stock. Some other professional money managers that hold long positions comprise Joseph Edelman’s Perceptive Advisors, Lawrence Kam’s Sonic Capital and Lei Zhang’s Hillhouse Capital Management. In terms of the portfolio weights assigned to each position Sonic Capital allocated the biggest weight to Regenxbio Inc (NASDAQ:RGNX), around 13.06% of its 13F portfolio. Burrage Capital Management is also relatively very bullish on the stock, earmarking 3.48 percent of its 13F equity portfolio to RGNX.
Because Regenxbio Inc (NASDAQ:RGNX) has experienced falling interest from the aggregate hedge fund industry, it’s easy to see that there is a sect of fund managers that decided to sell off their positions entirely in the first quarter. Intriguingly, Israel Englander’s Millennium Management said goodbye to the biggest stake of the 750 funds watched by Insider Monkey, valued at an estimated $4.3 million in stock. Greg Martinez’s fund, Parkman Healthcare Partners, also cut its stock, about $3.5 million worth. These bearish behaviors are interesting, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Regenxbio Inc (NASDAQ:RGNX) but similarly valued. We will take a look at Veracyte Inc (NASDAQ:VCYT), Cinemark Holdings, Inc. (NYSE:CNK), BMC Stock Holdings, Inc. (NASDAQ:BMCH), and Magellan Health Inc (NASDAQ:MGLN). This group of stocks’ market values are similar to RGNX’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| VCYT | 12 | 58406 | -2 |
| CNK | 27 | 190636 | 5 |
| BMCH | 23 | 210249 | -6 |
| MGLN | 15 | 234535 | -4 |
| Average | 19.25 | 173457 | -1.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 19.25 hedge funds with bullish positions and the average amount invested in these stocks was $173 million. That figure was $186 million in RGNX’s case. Cinemark Holdings, Inc. (NYSE:CNK) is the most popular stock in this table. On the other hand Veracyte Inc (NASDAQ:VCYT) is the least popular one with only 12 bullish hedge fund positions. Regenxbio Inc (NASDAQ:RGNX) is not the least popular stock in this group but hedge fund interest is still below average. 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 18.6% in 2020 through July 27th and surpassed the market by 17.1 percentage points. Unfortunately RGNX wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); RGNX investors were disappointed as the stock returned 14.8% since Q1 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.
