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 (10 coronavirus predictions).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Keeping this in mind, let’s take a look at whether Ascendis Pharma A/S (NASDAQ:ASND) is a good investment right now. We like to analyze hedge fund sentiment before conducting days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy League graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments and it is a fact that hedge funds’ picks don’t beat the market 100% of the time, but their consensus picks have historically done very well and have outperformed the market after adjusting for risk.
Is Ascendis Pharma A/S (NASDAQ:ASND) worth your attention right now? Hedge funds are betting on the stock. The number of long hedge fund positions went up by 4 lately. Our calculations also showed that ASND 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.
Peter Kolchinsky of RA Capital Management
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. Now let’s check out the recent hedge fund action encompassing Ascendis Pharma A/S (NASDAQ:ASND).
Hedge fund activity in Ascendis Pharma A/S (NASDAQ:ASND)
At the end of the fourth quarter, a total of 38 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 12% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards ASND over the last 18 quarters. With hedgies’ sentiment swirling, there exists a select group of noteworthy hedge fund managers who were adding to their holdings meaningfully (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, Peter Kolchinsky’s RA Capital Management has the largest position in Ascendis Pharma A/S (NASDAQ:ASND), worth close to $582.3 million, accounting for 17.7% of its total 13F portfolio. Coming in second is Julian Baker and Felix Baker of Baker Bros. Advisors, with a $471.7 million position; the fund has 2.5% of its 13F portfolio invested in the stock. Some other members of the smart money that are bullish contain Samuel Isaly’s OrbiMed Advisors, Albert Cha and Frank Kung’s Vivo Capital and Behzad Aghazadeh’s venBio Select Advisor. In terms of the portfolio weights assigned to each position Vivo Capital allocated the biggest weight to Ascendis Pharma A/S (NASDAQ:ASND), around 21.18% of its 13F portfolio. RA Capital Management is also relatively very bullish on the stock, dishing out 17.66 percent of its 13F equity portfolio to ASND.
With a general bullishness amongst the heavyweights, key money managers were leading the bulls’ herd. Logos Capital, managed by Arsani William, initiated the largest position in Ascendis Pharma A/S (NASDAQ:ASND). Logos Capital had $25 million invested in the company at the end of the quarter. Michel Massoud’s Melqart Asset Management also made a $16.1 million investment in the stock during the quarter. The following funds were also among the new ASND investors: Michael Rockefeller and Karl Kroeker’s Woodline Partners, Christiana Goh Bardon’s Burrage Capital Management, and Louis Bacon’s Moore Global Investments.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Ascendis Pharma A/S (NASDAQ:ASND) but similarly valued. These stocks are Sibanye Gold Ltd (NYSE:SBGL), The Gap Inc. (NYSE:GPS), Pearson PLC (NYSE:PSO), and Ciena Corporation (NASDAQ:CIEN). This group of stocks’ market caps match ASND’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SBGL | 13 | 187761 | -2 |
| GPS | 31 | 128423 | 4 |
| PSO | 5 | 4209 | 2 |
| CIEN | 35 | 521742 | 4 |
| Average | 21 | 210534 | 2 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 21 hedge funds with bullish positions and the average amount invested in these stocks was $211 million. That figure was $2756 million in ASND’s case. Ciena Corporation (NASDAQ:CIEN) is the most popular stock in this table. On the other hand Pearson PLC (NYSE:PSO) is the least popular one with only 5 bullish hedge fund positions. Compared to these stocks Ascendis Pharma A/S (NASDAQ:ASND) is more popular among hedge funds. 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 22.3% in 2020 through March 16th and still beat the market by 3.2 percentage points. Unfortunately ASND wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on ASND were disappointed as the stock returned -30.3% during the first two and a half months of 2020 (through March 16th) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as most of these stocks already outperformed the market in Q1.
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.
