Hedge Funds Are Dumping Acceleron Pharma Inc (XLRN)

It’s a little-known fact that stock performance is not evenly distributed (i.e. you don’t have a 50/50 chance of picking a market-beating stock). In fact, despite the S&P 500 gaining about 5.2% between November 1, 2014 and October 30, 2015, less than 49% of the stocks in the index beat the market during that time. In contrast, the 30 stocks from the index which were the most popular among the investors that we track returned 9.5% during that time and 63% of them beat the market. This shows that while hedge funds get a lot of flak from the mainstream media for their performance, it can be rewarding to follow their moves using the right sets of data. Even then, there is never a foolproof strategy to generating returns, as even the collective wisdom of top hedge funds gets it wrong sometimes, as in the case of some of their top picks from the index like Micron and Anadarko. The data, though, shows that following the collective wisdom of select hedge funds can be a very wise move overall.

Acceleron Pharma Inc (NASDAQ:XLRN) is a small-cap biotech company, whose stock has surged since the ed of September, but it registered a decrease in enthusiasm from smart money investors in our database during the third quarter. The company was in 15 hedge funds’ portfolios at the end of September. At the end of this article we will also compare XLRN to other stocks, including Chatham Lodging Trust (NYSE:CLDT), Golub Capital BDC Inc (NASDAQ:GBDC), and Safety Insurance Group, Inc. (NASDAQ:SAFT) to get a better sense of its popularity.

According to most shareholders, hedge funds are perceived as underperforming, outdated investment tools of the past. While there are more than 8000 funds with their doors open at present, Our researchers choose to focus on the moguls of this club, approximately 700 funds. These investment experts oversee bulk of the hedge fund industry’s total capital, and by tracking their finest equity investments, Insider Monkey has unsheathed a number of investment strategies that have historically outperformed the broader indices. Insider Monkey’s small-cap hedge fund strategy beat the S&P 500 index by 12 percentage points per year for a decade in their back tests.

Keeping this in mind, let’s take a glance at the fresh action encompassing Acceleron Pharma Inc (NASDAQ:XLRN).

Hedge fund activity in Acceleron Pharma Inc (NASDAQ:XLRN)

Heading into Q4, a total of 15 of the hedge funds tracked by Insider Monkey held long positions in this stock, down by three funds over the quarter. With the smart money’s sentiment swirling, there exists a few key hedge fund managers who were increasing their holdings substantially (or already accumulated large positions).

Of the funds tracked by Insider Monkey, Adage Capital Management, managed by Phill Gross and Robert Atchinson, holds the most valuable position in Acceleron Pharma Inc (NASDAQ:XLRN). Adage Capital Management has a $22.9 million position in the stock, comprising 0.1% of its 13F portfolio. Sitting at the No. 2 spot is QVT Financial, managed by Daniel Gold, which holds a $21.5 million position; the fund has 0.7% of its 13F portfolio invested in the stock. Other professional money managers that are bullish contain Jerome Pfund and Michael Sjostrom’s Sectoral Asset Management, Ken Griffin’s Citadel Investment Group, and Joseph Edelman’s Perceptive Advisors.

Since Acceleron Pharma Inc (NASDAQ:XLRN) has witnessed declining sentiment from hedge fund managers, we can see that there lies a certain “tier” of fund managers that decided to sell off their entire stakes last quarter. It’s worth mentioning that Jim Simons’ Renaissance Technologies said goodbye to the largest stake of all the hedgies watched by Insider Monkey, comprising an estimated $2 million in stock. James Dondero’s fund, Highland Capital Management, also dropped its stock, about $1.7 million worth.

Let’s go over hedge fund activity in other stocks similar to Acceleron Pharma Inc (NASDAQ:XLRN). We will take a look at Chatham Lodging Trust (NYSE:CLDT), Golub Capital BDC Inc (NASDAQ:GBDC), Safety Insurance Group, Inc. (NASDAQ:SAFT), and Calgon Carbon Corporation (NYSE:CCC). This group of stocks’ market caps resemble XLRN’s market cap.

As you can see these stocks had an average of 10 hedge funds with bullish positions and the average amount invested in these stocks was $56 million. That figure was $99 million in XLRN’s case. Chatham Lodging Trust (NYSE:CLDT) is the most popular stock in this table with a total of 16 funds reporting long positions. On the other hand Safety Insurance Group, Inc. (NASDAQ:SAFT) is the least popular one with only 6 bullish hedge fund positions. Acceleron Pharma Inc (NASDAQ:XLRN) is not the most popular stock in this group, but hedge fund interest is considerably above average. This is a positive signal and Acceleron Pharma may be an interesting stock to look into, but we consider that CLDT may be a better bet, since it is more popular among the funds we track.