At Insider Monkey, we pore over the filings of nearly 750 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 September 30. In this article, we will use that wealth of knowledge to determine whether or not IVERIC bio, Inc. (NASDAQ:ISEE) makes for a good investment right now.
IVERIC bio, Inc. (NASDAQ:ISEE) shareholders have witnessed a decrease in activity from the world’s largest hedge funds of late. Our calculations also showed that ISEE 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.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
David E. Shaw of D.E. Shaw
We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. 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 even check out this option genius’ weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock already gained 20 percent. Now we’re going to analyze the key hedge fund action regarding IVERIC bio, Inc. (NASDAQ:ISEE).
What have hedge funds been doing with IVERIC bio, Inc. (NASDAQ:ISEE)?
Heading into the fourth quarter of 2019, a total of 5 of the hedge funds tracked by Insider Monkey were long this stock, a change of -17% from the second quarter of 2019. The graph below displays the number of hedge funds with bullish position in ISEE over the last 17 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in IVERIC bio, Inc. (NASDAQ:ISEE) was held by Tamarack Capital Management, which reported holding $3.4 million worth of stock at the end of September. It was followed by Renaissance Technologies with a $1.3 million position. Other investors bullish on the company included D E Shaw, Tang Capital Management, and Two Sigma Advisors. In terms of the portfolio weights assigned to each position Tamarack Capital Management allocated the biggest weight to IVERIC bio, Inc. (NASDAQ:ISEE), around 0.88% of its 13F portfolio. Tang Capital Management is also relatively very bullish on the stock, earmarking 0.11 percent of its 13F equity portfolio to ISEE.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Millennium Management. One hedge fund selling its entire position doesn’t always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don’t think this is the case in this case because none of the 750+ hedge funds tracked by Insider Monkey identified ISEE as a viable investment and initiated a position in the stock.
Let’s also examine hedge fund activity in other stocks similar to IVERIC bio, Inc. (NASDAQ:ISEE). We will take a look at Vertex Energy Inc (NASDAQ:VTNR), Perceptron, Inc. (NASDAQ:PRCP), Town Sports International Holdings, Inc. (NASDAQ:CLUB), and LSC Communications, Inc. (NYSE:LKSD). This group of stocks’ market caps resemble ISEE’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| VTNR | 6 | 5800 | 1 |
| PRCP | 6 | 15601 | 0 |
| CLUB | 9 | 22210 | -1 |
| LKSD | 10 | 6738 | 1 |
| Average | 7.75 | 12587 | 0.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 7.75 hedge funds with bullish positions and the average amount invested in these stocks was $13 million. That figure was $6 million in ISEE’s case. LSC Communications, Inc. (NYSE:LKSD) is the most popular stock in this table. On the other hand Vertex Energy Inc (NASDAQ:VTNR) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks IVERIC bio, Inc. (NASDAQ:ISEE) is even less popular than VTNR. Hedge funds clearly dropped the ball on ISEE as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. 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. A small number of hedge funds were also right about betting on ISEE as the stock returned 201.8% during the fourth quarter (through the end of November) and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.