Out of thousands of stocks that are currently traded on the market, it is difficult to identify those that will really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of nearly 750 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has the potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about Ascendis Pharma A/S (NASDAQ:ASND) and compare its performance to hedge funds’ consensus picks in 2019.
Hedge fund interest in Ascendis Pharma A/S (NASDAQ:ASND) shares was flat at the end of last quarter. This is usually a negative indicator. 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 Intercorp Financial Services Inc. (NYSE:IFS), YY Inc (NASDAQ:YY), and First Financial Bankshares Inc (NASDAQ:FFIN) to gather more data points. Our calculations also showed that ASND isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video at the end of this article for Q2 rankings).
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 91% since May 2014 and outperformed the Russell 2000 ETFs by nearly 40 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Peter Kolchinsky of RA Capital Management
We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius’ weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock already gained 20 percent. Keeping this in mind we’re going to analyze the key hedge fund action surrounding Ascendis Pharma A/S (NASDAQ:ASND).
Hedge fund activity in Ascendis Pharma A/S (NASDAQ:ASND)
At Q3’s end, a total of 33 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from one quarter earlier. By comparison, 27 hedge funds held shares or bullish call options in ASND a year ago. With hedgies’ capital changing hands, there exists an “upper tier” of notable hedge fund managers who were upping their stakes considerably (or already accumulated large positions).
Among these funds, RA Capital Management held the most valuable stake in Ascendis Pharma A/S (NASDAQ:ASND), which was worth $398 million at the end of the third quarter. On the second spot was OrbiMed Advisors which amassed $358.2 million worth of shares. Baker Bros. Advisors, Vivo Capital, and venBio Select Advisor were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position RA Capital Management allocated the biggest weight to Ascendis Pharma A/S (NASDAQ:ASND), around 23.72% of its 13F portfolio. Vivo Capital is also relatively very bullish on the stock, earmarking 22.58 percent of its 13F equity portfolio to ASND.
Due to the fact that Ascendis Pharma A/S (NASDAQ:ASND) has experienced falling interest from hedge fund managers, logic holds that there is a sect of fund managers who were dropping their full holdings by the end of the third quarter. Intriguingly, Joseph Edelman’s Perceptive Advisors cut the biggest investment of all the hedgies tracked by Insider Monkey, valued at about $54.5 million in stock, and Ori Hershkovitz’s Nexthera Capital was right behind this move, as the fund dumped about $6.9 million worth. These transactions are intriguing to say the least, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s also examine hedge fund activity in other stocks similar to Ascendis Pharma A/S (NASDAQ:ASND). These stocks are Intercorp Financial Services Inc. (NYSE:IFS), YY Inc (NASDAQ:YY), First Financial Bankshares Inc (NASDAQ:FFIN), and Cinemark Holdings, Inc. (NYSE:CNK). This group of stocks’ market caps are closest to ASND’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| IFS | 3 | 9694 | 3 |
| YY | 17 | 192246 | -5 |
| FFIN | 16 | 25822 | 4 |
| CNK | 19 | 232969 | -3 |
| Average | 13.75 | 115183 | -0.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 13.75 hedge funds with bullish positions and the average amount invested in these stocks was $115 million. That figure was $2023 million in ASND’s case. Cinemark Holdings, Inc. (NYSE:CNK) is the most popular stock in this table. On the other hand Intercorp Financial Services Inc. (NYSE:IFS) is the least popular one with only 3 bullish hedge fund positions. Compared to these stocks Ascendis Pharma A/S (NASDAQ:ASND) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.1% in 2019 through December 23rd and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. Hedge funds were also right about betting on ASND as the stock returned 107.3% so far in 2019 (through 12/23) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
