Looking for high-potential stocks? Just follow the big players within the hedge fund industry. Why should you do so? Let’s take a brief look at what statistics have to say about hedge funds’ stock picking abilities to illustrate. The Standard and Poor’s 500 Index returned approximately 7.6% in the 12 months ending November 21, with more than 51% of the stocks in the index failing to beat the benchmark. Therefore, the odds that one will pin down a winner by randomly picking a stock are less than the odds in a fair coin-tossing game. Conversely, best performing hedge funds’ 30 preferred mid-cap stocks generated a return of 18% during the same 12-month period. Coincidence? It might happen to be so, but it is unlikely. Our research covering a 17-year period indicates that hedge funds’ stock picks generate superior risk-adjusted returns. That’s why we believe it is wise to check hedge fund activity before you invest your time or your savings on a stock like AC Immune Ltd (NASDAQ:ACIU).
Is AC Immune Ltd (NASDAQ:ACIU) a buy, sell, or hold? The stock went public in September and by the end of the month, it managed to capture the attention of 10 funds tracked by Insider Monkey. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Archrock Inc (NYSE:AROC), Ply Gem Holdings Inc (NYSE:PGEM), and Kulicke and Soffa Industries Inc. (NASDAQ:KLIC) to get a better sense of its popularity.
We follow over 700 hedge funds and other institutional investors and by analyzing their quarterly 13F filings, we identify stocks that they are collectively bullish on and develop investment strategies based on this data. One strategy that outperformed the market over the last year involves selecting the 100 best-performing funds and identifying the 30 mid-cap stocks that they are collectively most bullish on. Over the past year, this strategy generated returns of 18%, topping the 8% gain registered by S&P 500 ETFs. We launched this strategy 2.5 years ago and it returned more than 39% since then, vs. 22% gain registered by the S&P 500 ETFs.
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What does the smart money think about AC Immune Ltd (NASDAQ:ACIU)?
As stated earlier, heading into the fourth quarter of 2016, a total of 10 of the hedge funds tracked by Insider Monkey were bullish on this stock. So, let’s check out which hedge funds were among the top holders of the stock at the end of September.
When looking at the institutional investors followed by Insider Monkey, Duquesne Capital, led by Stanley Druckenmiller, holds the biggest position in AC Immune Ltd (NASDAQ:ACIU). Duquesne Capital has a $24.7 million position in the stock, comprising 2.2% of its 13F portfolio. The second largest stake is held by Hillhouse Capital Management, led by Lei Zhang, holding a $9.1 million position. Some other professional money managers that hold long positions encompass Zach Schreiber’s Point State Capital, Phill Gross and Robert Atchinson’s Adage Capital Management and James Dondero’s Highland Capital Management. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.
On the next page, we’ll compare the sentiment surrounding AC Immune Ltd with the same metric registered by other stocks with similar market values.
Let’s check out hedge fund activity in other stocks similar to AC Immune Ltd (NASDAQ:ACIU). These stocks are Archrock Inc (NYSE:AROC), Ply Gem Holdings Inc (NYSE:PGEM), Kulicke and Soffa Industries Inc. (NASDAQ:KLIC), and Wabash National Corporation (NYSE:WNC). This group of stocks’ market caps are similar to ACIU’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| AROC | 18 | 176109 | 2 |
| PGEM | 18 | 60853 | 3 |
| KLIC | 18 | 93683 | -5 |
| WNC | 18 | 57722 | -1 |
As you can see these stocks had an average of 18 hedge funds with bullish positions and the average amount invested in these stocks was $97 million. That figure was $48 million in ACIU’s case. Archrock Inc (NYSE:AROC) is the most popular stock in this table. On the other hand Archrock Inc (NYSE:AROC) is the least popular one with only 18 bullish hedge fund positions. Compared to these stocks AC Immune Ltd (NASDAQ:ACIU) is even less popular than AROC. Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case more research is warranted.
Disclosure: None
