Before we spend days researching a stock idea we like to take a look at how hedge funds and billionaire investors recently traded that stock. Russell 2000 ETF (IWM) lagged the larger S&P 500 ETF (SPY) by more than 10 percentage points since the end of the third quarter of 2018. This means hedge funds that are allocating a higher percentage of their portfolio to small-cap stocks were probably underperforming the market. However, this also means that as small-cap stocks start to mean revert, these hedge funds will start delivering better returns than the S&P 500 Index funds. In this article, we will take a look at what hedge funds think about Homology Medicines, Inc. (NASDAQ:FIXX).
Is Homology Medicines, Inc. (NASDAQ:FIXX) ready to rally soon? The smart money is in an optimistic mood. The number of long hedge fund positions increased by 11 lately. Our calculations also showed that FIXX isn’t among the 30 most popular stocks among hedge funds (see the video below).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 25.8% year to date (through May 30th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 40 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let’s take a look at the recent hedge fund action surrounding Homology Medicines, Inc. (NASDAQ:FIXX).
What does smart money think about Homology Medicines, Inc. (NASDAQ:FIXX)?
Heading into the third quarter of 2019, a total of 18 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 157% from one quarter earlier. By comparison, 7 hedge funds held shares or bullish call options in FIXX a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Deerfield Management held the most valuable stake in Homology Medicines, Inc. (NASDAQ:FIXX), which was worth $112.7 million at the end of the second quarter. On the second spot was Vivo Capital which amassed $22.7 million worth of shares. Moreover, Casdin Capital, Rock Springs Capital Management, and Prosight Capital were also bullish on Homology Medicines, Inc. (NASDAQ:FIXX), allocating a large percentage of their portfolios to this stock.
Consequently, key money managers have jumped into Homology Medicines, Inc. (NASDAQ:FIXX) headfirst. Prosight Capital, managed by Lawrence Hawkins, initiated the biggest position in Homology Medicines, Inc. (NASDAQ:FIXX). Prosight Capital had $7.2 million invested in the company at the end of the quarter. Bihua Chen’s Cormorant Asset Management also made a $5.9 million investment in the stock during the quarter. The other funds with brand new FIXX positions are Steve Cohen’s Point72 Asset Management, Ken Greenberg and David Kim’s Ghost Tree Capital, and Anand Parekh’s Alyeska Investment Group.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Homology Medicines, Inc. (NASDAQ:FIXX) but similarly valued. We will take a look at QAD Inc. (NASDAQ:QADA), Fluidigm Corporation (NASDAQ:FLDM), NorthStar Realty Europe Corp. (NYSE:NRE), and ViewRay, Inc. (NASDAQ:VRAY). All of these stocks’ market caps are similar to FIXX’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| QADA | 11 | 113256 | -5 |
| FLDM | 17 | 137031 | -2 |
| NRE | 12 | 100119 | 3 |
| VRAY | 17 | 347601 | -6 |
| Average | 14.25 | 174502 | -2.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 14.25 hedge funds with bullish positions and the average amount invested in these stocks was $175 million. That figure was $185 million in FIXX’s case. Fluidigm Corporation (NASDAQ:FLDM) is the most popular stock in this table. On the other hand QAD Inc. (NASDAQ:QADA) is the least popular one with only 11 bullish hedge fund positions. Compared to these stocks Homology Medicines, Inc. (NASDAQ:FIXX) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately FIXX wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on FIXX were disappointed as the stock returned -7.5% during the third quarter 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 many of these stocks already outperformed the market in Q3.
Disclosure: None. This article was originally published at Insider Monkey.
