Is FibroGen Inc (NASDAQ:FGEN) a good investment right now? We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.
FibroGen Inc (NASDAQ:FGEN) was in 24 hedge funds’ portfolios at the end of September. FGEN has experienced an increase in activity from the world’s largest hedge funds lately. There were 16 hedge funds in our database with FGEN positions at the end of the previous quarter. Our calculations also showed that FGEN 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’ 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.
Oleg Nodelman of EcoR1 Capital
Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world’s most bearish hedge fund that’s more convinced than ever that a crash is coming, our long-short investment strategy doesn’t rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds‘ buy/sell signals. We’re going to take a peek at the key hedge fund action regarding FibroGen Inc (NASDAQ:FGEN).
What have hedge funds been doing with FibroGen Inc (NASDAQ:FGEN)?
Heading into the fourth quarter of 2019, a total of 24 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 50% from the previous quarter. By comparison, 17 hedge funds held shares or bullish call options in FGEN a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Of the funds tracked by Insider Monkey, Lei Zhang’s Hillhouse Capital Management has the number one position in FibroGen Inc (NASDAQ:FGEN), worth close to $129.6 million, accounting for 1.8% of its total 13F portfolio. The second most bullish fund manager is Adage Capital Management, managed by Phill Gross and Robert Atchinson, which holds a $55.5 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Remaining members of the smart money with similar optimism contain Oleg Nodelman’s EcoR1 Capital, Farallon Capital and Ken Griffin’s Citadel Investment Group. In terms of the portfolio weights assigned to each position EcoR1 Capital allocated the biggest weight to FibroGen Inc (NASDAQ:FGEN), around 6.04% of its portfolio. Sectoral Asset Management is also relatively very bullish on the stock, setting aside 2.13 percent of its 13F equity portfolio to FGEN.
As one would reasonably expect, specific money managers have been driving this bullishness. Hillhouse Capital Management, managed by Lei Zhang, assembled the largest position in FibroGen Inc (NASDAQ:FGEN). Hillhouse Capital Management had $129.6 million invested in the company at the end of the quarter. Joel Greenblatt’s Gotham Asset Management also made a $3 million investment in the stock during the quarter. The other funds with new positions in the stock are Paul Marshall and Ian Wace’s Marshall Wace, Israel Englander’s Millennium Management, and Michael Kharitonov and Jon David McAuliffe’s Voleon Capital.
Let’s check out hedge fund activity in other stocks similar to FibroGen Inc (NASDAQ:FGEN). We will take a look at Viavi Solutions Inc (NASDAQ:VIAV), Intelsat S.A. (NYSE:I), Avista Corporation (NYSE:AVA), and BankUnited, Inc. (NYSE:BKU). This group of stocks’ market values match FGEN’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| VIAV | 30 | 333312 | 8 |
| I | 48 | 1063619 | 6 |
| AVA | 15 | 137623 | 4 |
| BKU | 21 | 420103 | 2 |
| Average | 28.5 | 488664 | 5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 28.5 hedge funds with bullish positions and the average amount invested in these stocks was $489 million. That figure was $335 million in FGEN’s case. Intelsat S.A. (NYSE:I) is the most popular stock in this table. On the other hand Avista Corporation (NYSE:AVA) is the least popular one with only 15 bullish hedge fund positions. FibroGen Inc (NASDAQ:FGEN) is not the least popular stock in this group but hedge fund interest is still below average. 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 FGEN as the stock returned 14.6% during the first two months of Q4 and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.
