At Insider Monkey we follow nearly 750 of the best-performing investors and even though many of them lost money in the last couple of months of 2018 (some actually delivered very strong returns), the history teaches us that over the long-run they still manage to beat the market, which is why it can be profitable for us to imitate their activity. Of course, even the best money managers can sometimes get it wrong, but following some of their picks gives us a better chance to outperform the crowd than picking a random stock and this is where our research comes in.
Kezar Life Sciences, Inc. (NASDAQ:KZR) shareholders have witnessed a decrease in enthusiasm from smart money recently. Our calculations also showed that KZR isn’t among the 30 most popular stocks among hedge funds.
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 market by 32 percentage points since May 2014 through March 12, 2019 (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 27.5% through March 12, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Let’s go over the key hedge fund action surrounding Kezar Life Sciences, Inc. (NASDAQ:KZR).
What does the smart money think about Kezar Life Sciences, Inc. (NASDAQ:KZR)?
At the end of the fourth quarter, a total of 4 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -43% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards KZR over the last 14 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Cormorant Asset Management was the largest shareholder of Kezar Life Sciences, Inc. (NASDAQ:KZR), with a stake worth $33.6 million reported as of the end of December. Trailing Cormorant Asset Management was EcoR1 Capital, which amassed a stake valued at $25 million. Frazier Healthcare Partners and Point72 Asset Management also very fond of the stock, giving the stock large weights in their portfolios.
Due to the fact that Kezar Life Sciences, Inc. (NASDAQ:KZR) has faced a decline in interest from the entirety of the hedge funds we track, it’s easy to see that there were a few hedgies who sold off their positions entirely last quarter. Interestingly, Israel Englander’s Millennium Management cut the biggest stake of all the hedgies tracked by Insider Monkey, worth close to $1.2 million in stock. Lawrence Hawkins’s fund, Prosight Capital, also sold off its stock, about $1.1 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest fell by 3 funds last quarter.
Let’s now review hedge fund activity in other stocks similar to Kezar Life Sciences, Inc. (NASDAQ:KZR). These stocks are The Bancorp, Inc. (NASDAQ:TBBK), Gritstone Oncology, Inc. (NASDAQ:GRTS), Covia Holdings Corporation (NYSE:CVIA), and The First Bancshares, Inc. (MS) (NASDAQ:FBMS). This group of stocks’ market values resemble KZR’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| TBBK | 14 | 70000 | 1 |
| GRTS | 9 | 97302 | -6 |
| CVIA | 5 | 44983 | -2 |
| FBMS | 5 | 28942 | -2 |
| Average | 8.25 | 60307 | -2.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 8.25 hedge funds with bullish positions and the average amount invested in these stocks was $60 million. That figure was $67 million in KZR’s case. The Bancorp, Inc. (NASDAQ:TBBK) is the most popular stock in this table. On the other hand Covia Holdings Corporation (NYSE:CVIA) is the least popular one with only 5 bullish hedge fund positions. Compared to these stocks Kezar Life Sciences, Inc. (NASDAQ:KZR) is even less popular than CVIA. Hedge funds dodged a bullet by taking a bearish stance towards KZR. Our calculations showed that the top 15 most popular hedge fund stocks returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Unfortunately KZR wasn’t nearly as popular as these 15 stock (hedge fund sentiment was very bearish); KZR investors were disappointed as the stock returned -19.3% and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 15 most popular stocks) among hedge funds as 13 of these stocks already outperformed the market this year.
Disclosure: None. This article was originally published at Insider Monkey.