We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (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. Hedge Funds and other institutional investors have just completed filing their 13Fs with the Securities and Exchange Commission, revealing their equity portfolios as of the end of June. At Insider Monkey, we follow nearly 835 active hedge funds and notable investors and by analyzing their 13F filings, we can determine the stocks that they are collectively bullish on. One of their picks is ChemoCentryx Inc (NASDAQ:CCXI), so let’s take a closer look at the sentiment that surrounds it in the current quarter.
ChemoCentryx Inc (NASDAQ:CCXI) investors should pay attention to an increase in hedge fund sentiment lately. Our calculations also showed that CCXI 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).
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by more than 41 percentage points since March 2017 (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 35.3% through March 3rd. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Kamran Moghtaderi of Eversept Partners
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. 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. Keeping this in mind let’s review the recent hedge fund action regarding ChemoCentryx Inc (NASDAQ:CCXI).
Hedge fund activity in ChemoCentryx Inc (NASDAQ:CCXI)
At Q4’s end, a total of 23 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 35% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in CCXI over the last 18 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, RA Capital Management held the most valuable stake in ChemoCentryx Inc (NASDAQ:CCXI), which was worth $126.5 million at the end of the third quarter. On the second spot was Cormorant Asset Management which amassed $114.7 million worth of shares. Consonance Capital Management, Farallon Capital, and Renaissance Technologies were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Consonance Capital Management allocated the biggest weight to ChemoCentryx Inc (NASDAQ:CCXI), around 4.59% of its 13F portfolio. Cormorant Asset Management is also relatively very bullish on the stock, designating 4.58 percent of its 13F equity portfolio to CCXI.
As industrywide interest jumped, some big names have jumped into ChemoCentryx Inc (NASDAQ:CCXI) headfirst. RA Capital Management, managed by Peter Kolchinsky, assembled the biggest position in ChemoCentryx Inc (NASDAQ:CCXI). RA Capital Management had $126.5 million invested in the company at the end of the quarter. Kamran Moghtaderi’s Eversept Partners also made a $20.3 million investment in the stock during the quarter. The other funds with new positions in the stock are Phill Gross and Robert Atchinson’s Adage Capital Management, Arsani William’s Logos Capital, and Paul Marshall and Ian Wace’s Marshall Wace LLP.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as ChemoCentryx Inc (NASDAQ:CCXI) but similarly valued. These stocks are WSFS Financial Corporation (NASDAQ:WSFS), Sprouts Farmers Market Inc (NASDAQ:SFM), Greif, Inc. (NYSE:GEF), and Inter Parfums, Inc. (NASDAQ:IPAR). 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 |
|---|---|---|---|
| WSFS | 16 | 174571 | 5 |
| SFM | 30 | 331285 | 4 |
| GEF | 18 | 87008 | 3 |
| IPAR | 15 | 67320 | 1 |
| Average | 19.75 | 165046 | 3.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 19.75 hedge funds with bullish positions and the average amount invested in these stocks was $165 million. That figure was $532 million in CCXI’s case. Sprouts Farmers Market Inc (NASDAQ:SFM) is the most popular stock in this table. On the other hand Inter Parfums, Inc. (NASDAQ:IPAR) is the least popular one with only 15 bullish hedge fund positions. ChemoCentryx Inc (NASDAQ:CCXI) is not the most popular stock in this group but hedge fund interest is still above average. 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 17.4% in 2020 through March 25th but still beat the market by 5.5 percentage points. Hedge funds were also right about betting on CCXI as the stock returned -1.7% during the first quarter (through March 25th) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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.
