Coronavirus is probably the #1 concern in investors’ minds right now. It should be. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW. We predicted that a US recession is imminent and US stocks will go down by at least 20% in the next 3-6 months. We also told you to short the market ETFs and buy long-term bonds. Investors who agreed with us and replicated these trades are up double digits whereas the market is down double digits. Our article also called for a total international travel ban to prevent the spread of the coronavirus especially from Europe. We were one step ahead of the markets and the president (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. The Insider Monkey team has completed processing the quarterly 13F filings for the December 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 Acceleron Pharma Inc (NASDAQ:XLRN).
Is Acceleron Pharma Inc (NASDAQ:XLRN) the right pick for your portfolio? Money managers are taking a bullish view. The number of long hedge fund positions inched up by 1 recently. Our calculations also showed that XLRN isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings). XLRN was in 27 hedge funds’ portfolios at the end of the fourth quarter of 2019. There were 26 hedge funds in our database with XLRN positions at the end of the previous quarter.
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 S&P 500 ETFs by 41 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 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 leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we’re going to take a gander at the key hedge fund action surrounding Acceleron Pharma Inc (NASDAQ:XLRN).
Hedge fund activity in Acceleron Pharma Inc (NASDAQ:XLRN)
At Q4’s end, a total of 27 of the hedge funds tracked by Insider Monkey were long this stock, a change of 4% from the previous quarter. By comparison, 19 hedge funds held shares or bullish call options in XLRN a year ago. With the smart money’s capital changing hands, there exists an “upper tier” of key hedge fund managers who were increasing their holdings meaningfully (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Farallon Capital holds the most valuable position in Acceleron Pharma Inc (NASDAQ:XLRN). Farallon Capital has a $106 million position in the stock, comprising 0.9% of its 13F portfolio. The second most bullish fund manager is Deerfield Management, managed by James E. Flynn, which holds a $72.6 million position; the fund has 2.3% of its 13F portfolio invested in the stock. Some other professional money managers that hold long positions contain Jeffrey Jay and David Kroin’s Great Point Partners, Ken Griffin’s Citadel Investment Group and Panayotis Takis Sparaggis’s Alkeon Capital Management. In terms of the portfolio weights assigned to each position Foresite Capital allocated the biggest weight to Acceleron Pharma Inc (NASDAQ:XLRN), around 7.57% of its 13F portfolio. Great Point Partners is also relatively very bullish on the stock, dishing out 4.62 percent of its 13F equity portfolio to XLRN.
With a general bullishness amongst the heavyweights, key money managers have been driving this bullishness. Healthcor Management LP, managed by Arthur B Cohen and Joseph Healey, created the biggest position in Acceleron Pharma Inc (NASDAQ:XLRN). Healthcor Management LP had $17.1 million invested in the company at the end of the quarter. Arsani William’s Logos Capital also made a $14.2 million investment in the stock during the quarter. The other funds with new positions in the stock are Samuel Isaly’s OrbiMed Advisors, David Harding’s Winton Capital Management, and Peter Muller’s PDT Partners.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Acceleron Pharma Inc (NASDAQ:XLRN) but similarly valued. We will take a look at Apollo Commercial Real Est. Finance Inc (NYSE:ARI), KAR Auction Services Inc (NYSE:KAR), NuStar Energy L.P. (NYSE:NS), and Acacia Communications, Inc. (NASDAQ:ACIA). This group of stocks’ market valuations are similar to XLRN’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ARI | 16 | 81491 | 6 |
| KAR | 26 | 399012 | -7 |
| NS | 7 | 27233 | 4 |
| ACIA | 31 | 644307 | 4 |
| Average | 20 | 288011 | 1.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 20 hedge funds with bullish positions and the average amount invested in these stocks was $288 million. That figure was $393 million in XLRN’s case. Acacia Communications, Inc. (NASDAQ:ACIA) is the most popular stock in this table. On the other hand NuStar Energy L.P. (NYSE:NS) is the least popular one with only 7 bullish hedge fund positions. Acceleron Pharma Inc (NASDAQ:XLRN) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 17.4% in 2020 through March 25th but still beat the market by 5.5 percentage points. Hedge funds were also right about betting on XLRN as the stock returned 49.1% during the first quarter (through March 25th) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
