Based on the fact that hedge funds have collectively under-performed the market for several years, it would be easy to assume that their stock picks simply aren’t very good. However, our research shows this not to be the case. In fact, when it comes to their very top picks collectively, they show a strong ability to pick winning stocks. This year hedge funds’ top 30 stock picks easily bested the broader market, at 6.7% compared to 2.6%, despite there being a few duds in there like Facebook (even their collective wisdom isn’t perfect). The results show that there is plenty of merit to imitating the collective wisdom of top investors.
Aeglea BioTherapeutics, Inc. (NASDAQ:AGLE) shareholders have witnessed a decrease in hedge fund sentiment lately. Our calculations also showed that AGLE isn’t among the 30 most popular stocks among hedge funds.
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’ 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 18 percentage points since May 2014 through December 3, 2018 (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 24% through December 3, 2018. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Let’s go over the recent hedge fund action regarding Aeglea BioTherapeutics, Inc. (NASDAQ:AGLE).
How have hedgies been trading Aeglea BioTherapeutics, Inc. (NASDAQ:AGLE)?
At Q3’s end, a total of 10 of the hedge funds tracked by Insider Monkey were long this stock, a change of -17% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in AGLE over the last 13 quarters. With hedgies’ sentiment swirling, there exists a select group of notable hedge fund managers who were upping their holdings significantly (or already accumulated large positions).
Among these funds, Nantahala Capital Management held the most valuable stake in Aeglea BioTherapeutics, Inc. (NASDAQ:AGLE), which was worth $24.2 million at the end of the third quarter. On the second spot was OrbiMed Advisors which amassed $20.7 million worth of shares. Moreover, Baker Bros. Advisors, Adage Capital Management, and Rock Springs Capital Management were also bullish on Aeglea BioTherapeutics, Inc. (NASDAQ:AGLE), allocating a large percentage of their portfolios to this stock.
Judging by the fact that Aeglea BioTherapeutics, Inc. (NASDAQ:AGLE) has witnessed a decline in interest from the smart money, logic holds that there is a sect of money managers who were dropping their full holdings in the third quarter. Interestingly, Israel Englander’s Millennium Management cut the biggest investment of the “upper crust” of funds monitored by Insider Monkey, valued at close to $5 million in stock. George Soros’s fund, Soros Fund Management, also cut its stock, about $2.2 million worth. These transactions are important to note, as total hedge fund interest was cut by 2 funds in the third quarter.
Let’s now review hedge fund activity in other stocks similar to Aeglea BioTherapeutics, Inc. (NASDAQ:AGLE). These stocks are Spirit of Texas Bancshares, Inc. (NASDAQ:STXB), Windstream Holdings, Inc. (NASDAQ:WIN), OptimizeRx Corporation (NASDAQ:OPRX), and Rocky Brands, Inc. (NASDAQ:RCKY). This group of stocks’ market values match AGLE’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| STXB | 3 | 1384 | 0 |
| WIN | 20 | 42668 | 1 |
| OPRX | 5 | 17775 | 3 |
| RCKY | 6 | 15920 | 0 |
| Average | 8.5 | 19437 | 1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 8.5 hedge funds with bullish positions and the average amount invested in these stocks was $19 million. That figure was $83 million in AGLE’s case. Windstream Holdings, Inc. (NASDAQ:WIN) is the most popular stock in this table. On the other hand Spirit of Texas Bancshares, Inc. (NASDAQ:STXB) is the least popular one with only 3 bullish hedge fund positions. Aeglea BioTherapeutics, Inc. (NASDAQ:AGLE) 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. In this regard WIN might be a better candidate to consider a long position.
Disclosure: None. This article was originally published at Insider Monkey.
