The market has been volatile in the fourth quarter as the Federal Reserve continued its rate hikes to normalize the interest rates. Small cap stocks have been hit hard as a result, as the Russell 2000 ETF (IWM) has underperformed the larger S&P 500 ETF (SPY) by nearly 7 percentage points. SEC filings and hedge fund investor letters indicate that the smart money seems to be paring back their overall long exposure since summer months, and the funds’ movements is one of the reasons why the major indexes have retraced. In this article, we analyze what the smart money thinks of Akebia Therapeutics Inc (NASDAQ:AKBA) and find out how it is affected by hedge funds’ moves.
Akebia Therapeutics Inc (NASDAQ:AKBA) has seen an increase in activity from the world’s largest hedge funds of late. Our calculations also showed that AKBA isn’t among the 30 most popular stocks among hedge funds.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.
Let’s review the fresh hedge fund action regarding Akebia Therapeutics Inc (NASDAQ:AKBA).
What have hedge funds been doing with Akebia Therapeutics Inc (NASDAQ:AKBA)?
Heading into the first quarter of 2019, a total of 20 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 5% from the previous quarter. On the other hand, there were a total of 24 hedge funds with a bullish position in AKBA a year ago. With hedgies’ positions undergoing their usual ebb and flow, there exists an “upper tier” of notable hedge fund managers who were adding to their stakes significantly (or already accumulated large positions).
The largest stake in Akebia Therapeutics Inc (NASDAQ:AKBA) was held by Baupost Group, which reported holding $135.3 million worth of stock at the end of December. It was followed by Abrams Capital Management with a $31.3 million position. Other investors bullish on the company included Nantahala Capital Management, Perceptive Advisors, and Citadel Investment Group.
Consequently, key money managers have jumped into Akebia Therapeutics Inc (NASDAQ:AKBA) headfirst. Baupost Group, managed by Seth Klarman, assembled the largest position in Akebia Therapeutics Inc (NASDAQ:AKBA). Baupost Group had $135.3 million invested in the company at the end of the quarter. Matthew Tewksbury’s Stevens Capital Management also initiated a $0.2 million position during the quarter. The other funds with new positions in the stock are Mike Vranos’s Ellington, Peter Algert and Kevin Coldiron’s Algert Coldiron Investors, and Minhua Zhang’s Weld Capital Management.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Akebia Therapeutics Inc (NASDAQ:AKBA) but similarly valued. These stocks are Peoples Utah Bancorp (NASDAQ:PUB), TPG Pace Holdings Corp. (NYSE:TPGH), DHT Holdings Inc (NYSE:DHT), and Establishment Labs Holdings Inc. (NASDAQ:ESTA). This group of stocks’ market valuations resemble AKBA’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| PUB | 3 | 15347 | 0 |
| TPGH | 17 | 190117 | 0 |
| DHT | 17 | 64937 | 5 |
| ESTA | 9 | 68781 | -3 |
| Average | 11.5 | 84796 | 0.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 11.5 hedge funds with bullish positions and the average amount invested in these stocks was $85 million. That figure was $235 million in AKBA’s case. TPG Pace Holdings Corp. (NYSE:TPGH) is the most popular stock in this table. On the other hand Peoples Utah Bancorp (NASDAQ:PUB) is the least popular one with only 3 bullish hedge fund positions. Compared to these stocks Akebia Therapeutics Inc (NASDAQ:AKBA) is more popular among hedge funds. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Hedge funds were also right about betting on AKBA, though not to the same extent, as the stock returned 18.4% and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.
