Hedge Funds Are Buying Acceleron Pharma Inc (XLRN)

While the market driven by short-term sentiment influenced by the accommodative interest rate environment in the US, virus news and stimulus spending, many smart money investors are starting to get cautious towards the current bull run since March, 2020 and hedging or reducing many of their long positions. Some fund managers are betting on Dow hitting 40,000 to generate strong returns. However, as we know, big investors usually buy stocks with strong fundamentals that can deliver gains both in bull and bear markets, which is why we believe we can profit from imitating them. In this article, we are going to take a look at the smart money sentiment surrounding Acceleron Pharma Inc (NASDAQ:XLRN).

Acceleron Pharma Inc (NASDAQ:XLRN) shareholders have witnessed an increase in hedge fund interest recently. Acceleron Pharma Inc (NASDAQ:XLRN) was in 43 hedge funds’ portfolios at the end of June. The all time high for this statistic is 48. Our calculations also showed that XLRN isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).

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 79 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.

Robert Atchinson of Adage Capital Management

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, artificial intelligence is one of the fastest-growing industries right now, so we are checking out stock pitches like this emerging AI stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. 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. You can subscribe to our free daily newsletter on our homepage. Now let’s take a glance at the new hedge fund action surrounding Acceleron Pharma Inc (NASDAQ:XLRN).

Do Hedge Funds Think XLRN Is A Good Stock To Buy Now?

Heading into the third quarter of 2021, a total of 43 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 39% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards XLRN over the last 24 quarters. With hedgies’ sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).

More specifically, 0 was the largest shareholder of Acceleron Pharma Inc (NASDAQ:XLRN), with a stake worth $376.5 million reported as of the end of June. Trailing Avoro Capital Advisors (venBio Select Advisor) was Farallon Capital, which amassed a stake valued at $313.7 million. Darwin Global Management, Alkeon Capital Management, and Holocene Advisors 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 Darwin Global Management allocated the biggest weight to Acceleron Pharma Inc (NASDAQ:XLRN), around 35.63% of its 13F portfolio. Foresite Capital is also relatively very bullish on the stock, earmarking 14.45 percent of its 13F equity portfolio to XLRN.

With a general bullishness amongst the heavyweights, specific money managers have jumped into Acceleron Pharma Inc (NASDAQ:XLRN) headfirst. Adage Capital Management, managed by Phill Gross and Robert Atchinson, initiated the most valuable position in Acceleron Pharma Inc (NASDAQ:XLRN). Adage Capital Management had $43.9 million invested in the company at the end of the quarter. Joseph Edelman’s Perceptive Advisors also initiated a $28.5 million position during the quarter. The following funds were also among the new XLRN investors: Andreas Halvorsen’s Viking Global, Mark Kingdon’s Kingdon Capital, and Paul Tudor Jones’s Tudor Investment Corp.

Let’s check out hedge fund activity in other stocks similar to Acceleron Pharma Inc (NASDAQ:XLRN). These stocks are Zhihu Inc. (NYSE:ZH), II-VI, Inc. (NASDAQ:IIVI), Crocs, Inc. (NASDAQ:CROX), Old Republic International Corporation (NYSE:ORI), Shift4 Payments, Inc. (NYSE:FOUR), Kingsoft Cloud Holdings Limited (NASDAQ:KC), and Chemed Corporation (NYSE:CHE). This group of stocks’ market caps resemble XLRN’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 25.4 hedge funds with bullish positions and the average amount invested in these stocks was $387 million. That figure was $1579 million in XLRN’s case. Crocs, Inc. (NASDAQ:CROX) is the most popular stock in this table. On the other hand Zhihu Inc. (NYSE:ZH) is the least popular one with only 10 bullish hedge fund positions. Compared to these stocks Acceleron Pharma Inc (NASDAQ:XLRN) is more popular among hedge funds. Our overall hedge fund sentiment score for XLRN is 86.9. Stocks with 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 showed 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 returned 22.9% in 2021 through October 1st but still managed to beat the market by 5.6 percentage points. Hedge funds were also right about betting on XLRN as the stock returned 38.9% since the end of June (through 10/1) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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