Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed in recent years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets hoping that they will outperform the broader market. Our research shows that certain hedge funds do have great stock picking skills (and we can identify these hedge funds in advance pretty accurately), so let’s take a glance at the smart money sentiment towards ChemoCentryx Inc (NASDAQ:CCXI).
Hedge fund interest in ChemoCentryx Inc (NASDAQ:CCXI) shares was flat at the end of last quarter. This is usually a negative indicator. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Willdan Group, Inc. (NASDAQ:WLDN), BioSpecifics Technologies Corp. (NASDAQ:BSTC), and AMAG Pharmaceuticals, Inc. (NASDAQ:AMAG) to gather more data points. Our calculations also showed that CCXI 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.
Jim Simons of Renaissance Technologies
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. 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 also rely on the best performing hedge funds‘ buy/sell signals. We’re going to take a glance at the latest hedge fund action encompassing ChemoCentryx Inc (NASDAQ:CCXI).
What does smart money think about ChemoCentryx Inc (NASDAQ:CCXI)?
At the end of the third quarter, a total of 17 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the second quarter of 2019. By comparison, 18 hedge funds held shares or bullish call options in CCXI a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to Insider Monkey’s hedge fund database, Farallon Capital has the largest position in ChemoCentryx Inc (NASDAQ:CCXI), worth close to $13.7 million, corresponding to 0.1% of its total 13F portfolio. Sitting at the No. 2 spot is Cormorant Asset Management, managed by Bihua Chen, which holds a $12.3 million position; 0.8% of its 13F portfolio is allocated to the stock. Other hedge funds and institutional investors that hold long positions include Mitchell Blutt’s Consonance Capital Management, Mark Lampert’s Biotechnology Value Fund and Renaissance Technologies. In terms of the portfolio weights assigned to each position Consonance Capital Management allocated the biggest weight to ChemoCentryx Inc (NASDAQ:CCXI), around 1.12% of its 13F portfolio. Biotechnology Value Fund is also relatively very bullish on the stock, setting aside 1.01 percent of its 13F equity portfolio to CCXI.
Seeing as ChemoCentryx Inc (NASDAQ:CCXI) has witnessed falling interest from the entirety of the hedge funds we track, it’s safe to say that there were a few hedge funds that slashed their positions entirely heading into Q4. Intriguingly, Michael Castor’s Sio Capital cut the largest investment of the 750 funds monitored by Insider Monkey, valued at close to $0.9 million in stock, and Peter A. Wright’s P.A.W. Capital Partners was right behind this move, as the fund cut about $0.6 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s now review hedge fund activity in other stocks similar to ChemoCentryx Inc (NASDAQ:CCXI). We will take a look at Willdan Group, Inc. (NASDAQ:WLDN), BioSpecifics Technologies Corp. (NASDAQ:BSTC), AMAG Pharmaceuticals, Inc. (NASDAQ:AMAG), and Himax Technologies, Inc. (NASDAQ:HIMX). All of these stocks’ market caps resemble CCXI’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| WLDN | 6 | 9610 | 1 |
| BSTC | 12 | 58911 | 1 |
| AMAG | 15 | 188076 | -2 |
| HIMX | 2 | 10401 | -6 |
| Average | 8.75 | 66750 | -1.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 8.75 hedge funds with bullish positions and the average amount invested in these stocks was $67 million. That figure was $65 million in CCXI’s case. AMAG Pharmaceuticals, Inc. (NASDAQ:AMAG) is the most popular stock in this table. On the other hand Himax Technologies, Inc. (NASDAQ:HIMX) is the least popular one with only 2 bullish hedge fund positions. Compared to these stocks ChemoCentryx Inc (NASDAQ:CCXI) is more popular among hedge funds. 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 CCXI as the stock returned 347.3% during the first two months of Q4 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.
Disclosure: None. This article was originally published at Insider Monkey.
