Russell 2000 ETF (IWM) lagged the larger S&P 500 ETF (SPY) by more than 10 percentage points since the end of the third quarter of 2018 as investors first worried over the possible ramifications of rising interest rates and the escalation of the trade war with China. The hedge funds and institutional investors we track typically invest more in smaller-cap stocks than an average investor (i.e. only about 60% S&P 500 constituents were among the 500 most popular stocks among hedge funds), and we have seen data that shows those funds paring back their overall exposure. Those funds cutting positions in small-caps is one reason why volatility has increased. In the following paragraphs, we take a closer look at what hedge funds and prominent investors think of Albireo Pharma, Inc. (NASDAQ:ALBO) and see how the stock is affected by the recent hedge fund activity.
Albireo Pharma, Inc. (NASDAQ:ALBO) shareholders have witnessed a decrease in enthusiasm from smart money of late. ALBO was in 11 hedge funds’ portfolios at the end of the third quarter of 2019. There were 12 hedge funds in our database with ALBO holdings at the end of the previous quarter. Our calculations also showed that ALBO isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to 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 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 Russell 2000 ETFs by 40 percentage points since May 2014 (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.
Noam Gottesman of GLG Partners
We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius’ weekly trade ideas. This December we recommended Adams Energy based on an under-the-radar fund manager’s investor letter and the stock gained 20 percent. Let’s check out the fresh hedge fund action encompassing Albireo Pharma, Inc. (NASDAQ:ALBO).
What have hedge funds been doing with Albireo Pharma, Inc. (NASDAQ:ALBO)?
Heading into the fourth quarter of 2019, a total of 11 of the hedge funds tracked by Insider Monkey were long this stock, a change of -8% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards ALBO over the last 17 quarters. With hedgies’ sentiment swirling, there exists a select group of key hedge fund managers who were upping their stakes substantially (or already accumulated large positions).
Among these funds, Perceptive Advisors held the most valuable stake in Albireo Pharma, Inc. (NASDAQ:ALBO), which was worth $34.1 million at the end of the third quarter. On the second spot was Prosight Capital which amassed $5.1 million worth of shares. Baker Bros. Advisors, GLG Partners, and Sectoral 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 Prosight Capital allocated the biggest weight to Albireo Pharma, Inc. (NASDAQ:ALBO), around 2.8% of its 13F portfolio. Perceptive Advisors is also relatively very bullish on the stock, dishing out 0.92 percent of its 13F equity portfolio to ALBO.
Since Albireo Pharma, Inc. (NASDAQ:ALBO) has faced bearish sentiment from the aggregate hedge fund industry, it’s easy to see that there exists a select few money managers that elected to cut their entire stakes last quarter. Interestingly, Renaissance Technologies dropped the biggest stake of the 750 funds watched by Insider Monkey, totaling an estimated $0.3 million in stock, and David E. Shaw’s D E Shaw was right behind this move, as the fund sold off about $0.2 million worth. These transactions are interesting, as total hedge fund interest dropped by 1 funds last quarter.
Let’s now take a look at hedge fund activity in other stocks similar to Albireo Pharma, Inc. (NASDAQ:ALBO). These stocks are Sify Technologies Limited (NASDAQ:SIFY), Ocwen Financial Corporation (NYSE:OCN), Hooker Furniture Corporation (NASDAQ:HOFT), and Invacare Corporation (NYSE:IVC). This group of stocks’ market caps resemble ALBO’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SIFY | 1 | 746 | -1 |
| OCN | 10 | 31580 | 0 |
| HOFT | 10 | 46096 | 4 |
| IVC | 13 | 68290 | -1 |
| Average | 8.5 | 36678 | 0.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 8.5 hedge funds with bullish positions and the average amount invested in these stocks was $37 million. That figure was $54 million in ALBO’s case. Invacare Corporation (NYSE:IVC) is the most popular stock in this table. On the other hand Sify Technologies Limited (NASDAQ:SIFY) is the least popular one with only 1 bullish hedge fund positions. Albireo Pharma, Inc. (NASDAQ:ALBO) 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 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Hedge funds were also right about betting on ALBO as the stock returned 13.1% during the fourth quarter (through the end of November) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.
