We are still in an overall bull market and many stocks that smart money investors were piling into surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Hedge funds’ top 3 stock picks returned 41.7% this year and beat the S&P 500 ETFs by 14 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like X4 Pharmaceuticals, Inc. (NASDAQ:XFOR).
X4 Pharmaceuticals, Inc. (NASDAQ:XFOR) shares haven’t seen a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 6 hedge funds’ portfolios at the end of September. At the end of this article we will also compare XFOR to other stocks including Medallion Financial Corp. (NASDAQ:MFIN), MVC Capital, Inc. (NYSE:MVC), and SunOpta, Inc. (NASDAQ:STKL) to get a better sense of its popularity.
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.
Samuel Isaly of OrbiMed Advisors
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 take a gander at the latest hedge fund action encompassing X4 Pharmaceuticals, Inc. (NASDAQ:XFOR).
What have hedge funds been doing with X4 Pharmaceuticals, Inc. (NASDAQ:XFOR)?
At Q3’s end, a total of 6 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in XFOR over the last 17 quarters. With the smart money’s sentiment swirling, there exists a select group of key hedge fund managers who were upping their stakes considerably (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, Samuel Isaly’s OrbiMed Advisors has the biggest position in X4 Pharmaceuticals, Inc. (NASDAQ:XFOR), worth close to $11.9 million, accounting for 0.2% of its total 13F portfolio. The second largest stake is held by Cormorant Asset Management, managed by Bihua Chen, which holds a $11.2 million position; the fund has 0.7% of its 13F portfolio invested in the stock. Other members of the smart money that are bullish encompass Mark Lampert’s Biotechnology Value Fund, James E. Flynn’s Deerfield Management and Peter Kolchinsky’s RA Capital Management. In terms of the portfolio weights assigned to each position Biotechnology Value Fund allocated the biggest weight to X4 Pharmaceuticals, Inc. (NASDAQ:XFOR), around 0.79% of its 13F portfolio. Cormorant Asset Management is also relatively very bullish on the stock, setting aside 0.68 percent of its 13F equity portfolio to XFOR.
Earlier we told you that the aggregate hedge fund interest in the stock was unchanged and we view this as a negative development. Even though there weren’t any hedge funds dumping their holdings during the third quarter, there weren’t any hedge funds initiating brand new positions. This indicates that hedge funds, at the very best, perceive this stock as dead money and they haven’t identified any viable catalysts that can attract investor attention.
Let’s check out hedge fund activity in other stocks similar to X4 Pharmaceuticals, Inc. (NASDAQ:XFOR). These stocks are Medallion Financial Corp. (NASDAQ:MFIN), MVC Capital, Inc. (NYSE:MVC), SunOpta, Inc. (NASDAQ:STKL), and Olympic Steel, Inc. (NASDAQ:ZEUS). This group of stocks’ market caps match XFOR’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| MFIN | 7 | 3771 | 1 |
| MVC | 9 | 46000 | 0 |
| STKL | 13 | 62722 | -1 |
| ZEUS | 7 | 3501 | -2 |
| Average | 9 | 28999 | -0.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 9 hedge funds with bullish positions and the average amount invested in these stocks was $29 million. That figure was $46 million in XFOR’s case. SunOpta, Inc. (NASDAQ:STKL) is the most popular stock in this table. On the other hand Medallion Financial Corp. (NASDAQ:MFIN) is the least popular one with only 7 bullish hedge fund positions. Compared to these stocks X4 Pharmaceuticals, Inc. (NASDAQ:XFOR) is even less popular than MFIN. Hedge funds dodged a bullet by taking a bearish stance towards XFOR. Our calculations showed that the top 20 most popular hedge fund stocks returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately XFOR wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); XFOR investors were disappointed as the stock returned -16.4% during the fourth quarter (through the end of November) 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 70 percent of these stocks already outperformed the market so far in Q4.
Disclosure: None. This article was originally published at Insider Monkey.