Hedge funds are not perfect. They have their bad picks just like everyone else. Facebook, a stock hedge funds have loved, lost nearly 40% of its value at one point in 2018. Although hedge funds are not perfect, their consensus picks do deliver solid returns, however. Our data show the top 15 S&P 500 stocks among hedge funds at the end of December 2018 yielded an average return of 19.7% year-to-date, vs. a gain of 13.1% for the S&P 500 Index. Because hedge funds have a lot of resources and their consensus picks do well, we pay attention to what they think. In this article, we analyze what the elite funds think of FibroGen Inc (NASDAQ:FGEN).
Is FibroGen Inc (NASDAQ:FGEN) undervalued? Money managers are turning bullish. The number of long hedge fund positions went up by 3 in recent months. Our calculations also showed that FGEN isn’t among the 30 most popular stocks among hedge funds. FGEN was in 20 hedge funds’ portfolios at the end of December. There were 17 hedge funds in our database with FGEN holdings at the end of the previous quarter.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. 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.
We’re going to take a peek at the recent hedge fund action regarding FibroGen Inc (NASDAQ:FGEN).
How have hedgies been trading FibroGen Inc (NASDAQ:FGEN)?
At the end of the fourth quarter, a total of 20 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 18% from the second quarter of 2018. By comparison, 19 hedge funds held shares or bullish call options in FGEN a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in FibroGen Inc (NASDAQ:FGEN) was held by EcoR1 Capital, which reported holding $70.6 million worth of stock at the end of September. It was followed by Adage Capital Management with a $50.9 million position. Other investors bullish on the company included Farallon Capital, GLG Partners, and Rock Springs Capital Management.
With a general bullishness amongst the heavyweights, key hedge funds have been driving this bullishness. Marshall Wace LLP, managed by Paul Marshall and Ian Wace, established the largest position in FibroGen Inc (NASDAQ:FGEN). Marshall Wace LLP had $5.7 million invested in the company at the end of the quarter. Ken Griffin’s Citadel Investment Group also initiated a $2.6 million position during the quarter. The following funds were also among the new FGEN investors: Nick Thakore’s Diametric Capital, Mike Vranos’s Ellington, and Joel Greenblatt’s Gotham Asset Management.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as FibroGen Inc (NASDAQ:FGEN) but similarly valued. These stocks are Hospitality Properties Trust (NASDAQ:HPT), ALLETE Inc (NYSE:ALE), PBF Energy Inc (NYSE:PBF), and Jabil Inc. (NYSE:JBL). This group of stocks’ market caps are similar to FGEN’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| HPT | 16 | 70399 | 0 |
| ALE | 18 | 207421 | 1 |
| PBF | 18 | 393653 | -11 |
| JBL | 20 | 316036 | -2 |
| Average | 18 | 246877 | -3 |
View table here if you experience formatting issues.
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 $247 million. That figure was $222 million in FGEN’s case. Jabil Inc. (NYSE:JBL) is the most popular stock in this table. On the other hand Hospitality Properties Trust (NASDAQ:HPT) is the least popular one with only 16 bullish hedge fund positions. FibroGen Inc (NASDAQ:FGEN) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. 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. Unfortunately FGEN wasn’t nearly as popular as these 15 stock and hedge funds that were betting on FGEN were disappointed as the stock returned 1.2% 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.
