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. At Insider Monkey, we pore over the filings of nearly 835 top investment firms every quarter, a process we have now completed for the latest reporting period. The data we’ve gathered as a result gives us access to a wealth of collective knowledge based on these firms’ portfolio holdings as of December 31. In this article, we will use that wealth of knowledge to determine whether or not Insmed Incorporated (NASDAQ:INSM) makes for a good investment right now.
Insmed Incorporated (NASDAQ:INSM) was in 25 hedge funds’ portfolios at the end of December. INSM has experienced an increase in support from the world’s most elite money managers in recent months. There were 23 hedge funds in our database with INSM holdings at the end of the previous quarter. Our calculations also showed that INSM 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).
To most traders, hedge funds are perceived as worthless, old investment vehicles of yesteryear. While there are greater than 8000 funds trading today, Our experts look at the leaders of this group, around 850 funds. It is estimated that this group of investors preside over most of the hedge fund industry’s total asset base, and by monitoring their best investments, Insider Monkey has discovered various investment strategies that have historically outrun the market. Insider Monkey’s flagship short hedge fund strategy outstripped the S&P 500 short ETFs by around 20 percentage points annually since its inception in March 2017. Our portfolio of short stocks lost 35.3% since February 2017 (through March 3rd) even though the market was up more than 35% during the same period. We just shared a list of 7 short targets in our latest quarterly update .
William Leland Edwards of Palo Alto Investors
We leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like this one. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. 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 let’s take a glance at the fresh hedge fund action encompassing Insmed Incorporated (NASDAQ:INSM).
How have hedgies been trading Insmed Incorporated (NASDAQ:INSM)?
Heading into the first quarter of 2020, a total of 25 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 9% from one quarter earlier. On the other hand, there were a total of 16 hedge funds with a bullish position in INSM a year ago. With the smart money’s positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were adding to their holdings meaningfully (or already accumulated large positions).
The largest stake in Insmed Incorporated (NASDAQ:INSM) was held by Palo Alto Investors, which reported holding $163.5 million worth of stock at the end of September. It was followed by D E Shaw with a $71.4 million position. Other investors bullish on the company included Citadel Investment Group, Baker Bros. Advisors, and Vivo Capital. In terms of the portfolio weights assigned to each position Palo Alto Investors allocated the biggest weight to Insmed Incorporated (NASDAQ:INSM), around 9% of its 13F portfolio. Vivo Capital is also relatively very bullish on the stock, dishing out 2.13 percent of its 13F equity portfolio to INSM.
As aggregate interest increased, key money managers were breaking ground themselves. Millennium Management, managed by Israel Englander, created the biggest position in Insmed Incorporated (NASDAQ:INSM). Millennium Management had $19.7 million invested in the company at the end of the quarter. Brian Ashford-Russell and Tim Woolley’s Polar Capital also initiated a $6 million position during the quarter. The other funds with new positions in the stock are Ken Greenberg and David Kim’s Ghost Tree Capital, Jeffrey Jay and David Kroin’s Great Point Partners, and Jinghua Yan’s TwinBeech Capital.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Insmed Incorporated (NASDAQ:INSM) but similarly valued. These stocks are Noah Holdings Limited (NYSE:NOAH), Terex Corporation (NYSE:TEX), Heron Therapeutics Inc (NASDAQ:HRTX), and Aimmune Therapeutics Inc (NASDAQ:AIMT). This group of stocks’ market valuations are similar to INSM’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| NOAH | 15 | 355694 | -6 |
| TEX | 22 | 291253 | 3 |
| HRTX | 19 | 497040 | 3 |
| AIMT | 13 | 164507 | -7 |
| Average | 17.25 | 327124 | -1.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 17.25 hedge funds with bullish positions and the average amount invested in these stocks was $327 million. That figure was $490 million in INSM’s case. Terex Corporation (NYSE:TEX) is the most popular stock in this table. On the other hand Aimmune Therapeutics Inc (NASDAQ:AIMT) is the least popular one with only 13 bullish hedge fund positions. Compared to these stocks Insmed Incorporated (NASDAQ:INSM) is more popular among hedge funds. 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 13.0% in 2020 through April 6th and still beat the market by 4.2 percentage points. Unfortunately INSM wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on INSM were disappointed as the stock returned -25.6% during the three months of 2020 (through April 6th) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
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.
