Hedge fund managers like David Einhorn, Bill Ackman, or Carl Icahn became billionaires through reaping large profits for their investors, which is why piggybacking their stock picks may provide us with significant returns as well. Many hedge funds, like Paul Singer’s Elliott Management, are pretty secretive, but we can still get some insights by analyzing their quarterly 13F filings. One of the most fertile grounds for large abnormal returns is hedge funds’ most popular small-cap picks, which are not so widely followed and often trade at a discount to their intrinsic value. In this article we will check out hedge fund activity in another small-cap stock: Alnylam Pharmaceuticals, Inc. (NASDAQ:ALNY).
Is Alnylam Pharmaceuticals, Inc. (NASDAQ:ALNY) the right investment to pursue these days? The smart money is getting less optimistic. The number of bullish hedge fund bets shrunk by 2 recently. Our calculations also showed that ALNY isn’t among the 30 most popular stocks among hedge funds.
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.
Let’s take a look at the fresh hedge fund action regarding Alnylam Pharmaceuticals, Inc. (NASDAQ:ALNY).
Hedge fund activity in Alnylam Pharmaceuticals, Inc. (NASDAQ:ALNY)
Heading into the second quarter of 2019, a total of 26 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -7% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in ALNY over the last 15 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Maverick Capital was the largest shareholder of Alnylam Pharmaceuticals, Inc. (NASDAQ:ALNY), with a stake worth $300 million reported as of the end of March. Trailing Maverick Capital was 12 West Capital Management, which amassed a stake valued at $68.7 million. Bridger Management, Farallon Capital, and Slate Path Capital were also very fond of the stock, giving the stock large weights in their portfolios.
Seeing as Alnylam Pharmaceuticals, Inc. (NASDAQ:ALNY) has faced falling interest from hedge fund managers, logic holds that there were a few hedgies who were dropping their full holdings heading into Q3. Interestingly, Stephen DuBois’s Camber Capital Management sold off the biggest investment of the “upper crust” of funds watched by Insider Monkey, comprising an estimated $43.7 million in stock. Joseph Edelman’s fund, Perceptive Advisors, also sold off its stock, about $18.5 million worth. These moves are interesting, as aggregate hedge fund interest fell by 2 funds heading into Q3.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Alnylam Pharmaceuticals, Inc. (NASDAQ:ALNY) but similarly valued. We will take a look at Viacom, Inc. (NASDAQ:VIAB), The Gap Inc. (NYSE:GPS), AXA Equitable Holdings, Inc. (NYSE:EQH), and Vedanta Ltd (NYSE:VEDL). This group of stocks’ market valuations resemble ALNY’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| VIAB | 38 | 936205 | 1 |
| GPS | 27 | 317539 | 7 |
| EQH | 35 | 1030862 | 9 |
| VEDL | 6 | 50111 | -1 |
| Average | 26.5 | 583679 | 4 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 26.5 hedge funds with bullish positions and the average amount invested in these stocks was $584 million. That figure was $754 million in ALNY’s case. Viacom, Inc. (NASDAQ:VIAB) is the most popular stock in this table. On the other hand Vedanta Ltd (NYSE:VEDL) is the least popular one with only 6 bullish hedge fund positions. Alnylam Pharmaceuticals, Inc. (NASDAQ:ALNY) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Unfortunately ALNY wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); ALNY investors were disappointed as the stock returned -26.5% during the same time period 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 13 of these stocks already outperformed the market so far in Q2.
Disclosure: None. This article was originally published at Insider Monkey.
