We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do (like Melvin Capital’s recent GameStop losses). However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards Kiniksa Pharmaceuticals, Ltd. (NASDAQ:KNSA).
Kiniksa Pharmaceuticals, Ltd. (NASDAQ:KNSA) investors should be aware of a decrease in hedge fund sentiment lately. Kiniksa Pharmaceuticals, Ltd. (NASDAQ:KNSA) was in 16 hedge funds’ portfolios at the end of March. The all time high for this statistic is 20. There were 19 hedge funds in our database with KNSA holdings at the end of December. Our calculations also showed that KNSA isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).
To the average investor there are a large number of tools investors can use to grade their holdings. Two of the most underrated tools are hedge fund and insider trading sentiment. Our experts have shown that, historically, those who follow the top picks of the best fund managers can trounce their index-focused peers by a very impressive amount (see the details here). Also, our monthly newsletter’s portfolio of long stock picks returned 206.8% since March 2017 (through May 2021) and beat the S&P 500 Index by more than 115 percentage points. You can download a sample issue of this newsletter on our website .
Didric Cederholm of Lion Point Capital
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, pet market is growing at a 7% annual rate and is expected to reach $110 billion in 2021. So, we are checking out the 5 best stocks for animal lovers. We go through lists like the 15 best Jim Cramer stocks to identify the next Tesla that will deliver outsized returns. 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. Keeping this in mind we’re going to take a glance at the new hedge fund action surrounding Kiniksa Pharmaceuticals, Ltd. (NASDAQ:KNSA).
Do Hedge Funds Think KNSA Is A Good Stock To Buy Now?
At Q1’s end, a total of 16 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -16% from the fourth quarter of 2020. Below, you can check out the change in hedge fund sentiment towards KNSA over the last 23 quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were increasing their holdings considerably (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Lei Zhang’s Hillhouse Capital Management has the biggest position in Kiniksa Pharmaceuticals, Ltd. (NASDAQ:KNSA), worth close to $54.1 million, corresponding to 0.5% of its total 13F portfolio. The second most bullish fund manager is Baker Bros. Advisors, led by Julian Baker and Felix Baker, holding a $51.8 million position; the fund has 0.2% of its 13F portfolio invested in the stock. Other peers with similar optimism contain Ken Griffin’s Citadel Investment Group, Didric Cederholm’s Lion Point and Sander Gerber’s Hudson Bay Capital Management. In terms of the portfolio weights assigned to each position Lion Point allocated the biggest weight to Kiniksa Pharmaceuticals, Ltd. (NASDAQ:KNSA), around 1.67% of its 13F portfolio. Opaleye Management is also relatively very bullish on the stock, earmarking 0.87 percent of its 13F equity portfolio to KNSA.
Judging by the fact that Kiniksa Pharmaceuticals, Ltd. (NASDAQ:KNSA) has faced declining sentiment from the aggregate hedge fund industry, it’s safe to say that there lies a certain “tier” of fund managers that elected to cut their full holdings last quarter. It’s worth mentioning that Ting Jia’s Octagon Capital Advisors dropped the largest stake of the “upper crust” of funds followed by Insider Monkey, comprising an estimated $5.2 million in stock. Bhagwan Jay Rao’s fund, Integral Health Asset Management, also cut its stock, about $2.4 million worth. These bearish behaviors are interesting, as total hedge fund interest dropped by 3 funds last quarter.
Let’s go over hedge fund activity in other stocks similar to Kiniksa Pharmaceuticals, Ltd. (NASDAQ:KNSA). These stocks are Vocera Communications Inc (NYSE:VCRA), Simulations Plus, Inc. (NASDAQ:SLP), Encore Capital Group, Inc. (NASDAQ:ECPG), Designer Brands Inc. (NYSE:DBI), Safety Insurance Group, Inc. (NASDAQ:SAFT), Stride, Inc. (NYSE:LRN), and Matthews International Corp (NASDAQ:MATW). This group of stocks’ market valuations are closest to KNSA’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| VCRA | 20 | 119950 | 0 |
| SLP | 11 | 55563 | -3 |
| ECPG | 18 | 68698 | -2 |
| DBI | 18 | 110113 | 1 |
| SAFT | 15 | 43641 | 3 |
| LRN | 14 | 101456 | 0 |
| MATW | 15 | 89807 | -1 |
| Average | 15.9 | 84175 | -0.3 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 15.9 hedge funds with bullish positions and the average amount invested in these stocks was $84 million. That figure was $181 million in KNSA’s case. Vocera Communications Inc (NYSE:VCRA) is the most popular stock in this table. On the other hand Simulations Plus, Inc. (NASDAQ:SLP) is the least popular one with only 11 bullish hedge fund positions. Kiniksa Pharmaceuticals, Ltd. (NASDAQ:KNSA) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for KNSA is 53.8. 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. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. 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 gained 28.5% in 2021 through July 23rd and beat the market again by 10.1 percentage points. Unfortunately KNSA wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on KNSA were disappointed as the stock returned -21.7% since the end of March (through 7/23) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.
Follow Kiniksa Pharmaceuticals International Plc (NASDAQ:KNSA)
Follow Kiniksa Pharmaceuticals International Plc (NASDAQ:KNSA)
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Disclosure: None. This article was originally published at Insider Monkey.
