As we already know from media reports and hedge fund investor letters, hedge funds delivered their best returns in a decade. Most investors who decided to stick with hedge funds after a rough 2018 recouped their losses by the end of the fourth quarter of 2019. A significant number of hedge funds continued their strong performance in 2020 and 2021 as well. We get to see hedge funds’ thoughts towards the market and individual stocks by aggregating their quarterly portfolio movements and reading their investor letters. In this article, we will particularly take a look at what hedge funds think about Kaleido BioSciences, Inc. (NASDAQ:KLDO).
Is KLDO a good stock to buy? Kaleido BioSciences, Inc. (NASDAQ:KLDO) has experienced an increase in hedge fund interest in recent months. Kaleido BioSciences, Inc. (NASDAQ:KLDO) was in 6 hedge funds’ portfolios at the end of the first quarter of 2021. The all time high for this statistic is 7. There were 2 hedge funds in our database with KLDO holdings at the end of December. Our calculations also showed that KLDO isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).
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 S&P 500 ETFs by 115 percentage points since March 2017 (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.
Michael Gelband of ExodusPoint Capital
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, an activist hedge fund owns nearly 40% of this $24 biotech stock and is trying to buy the rest for around $50. So, we recommended a long position to our monthly premium newsletter subscribers. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. With all of this in mind we’re going to take a glance at the recent hedge fund action regarding Kaleido BioSciences, Inc. (NASDAQ:KLDO).
Do Hedge Funds Think KLDO Is A Good Stock To Buy Now?
Heading into the second quarter of 2021, a total of 6 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 200% from the fourth quarter of 2020. On the other hand, there were a total of 3 hedge funds with a bullish position in KLDO a year ago. With the smart money’s capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were adding to their stakes substantially (or already accumulated large positions).
More specifically, Palo Alto Investors was the largest shareholder of Kaleido BioSciences, Inc. (NASDAQ:KLDO), with a stake worth $6.4 million reported as of the end of March. Trailing Palo Alto Investors was Two Sigma Advisors, which amassed a stake valued at $0.8 million. Renaissance Technologies, Citadel Investment Group, and Citadel Investment Group 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 Palo Alto Investors allocated the biggest weight to Kaleido BioSciences, Inc. (NASDAQ:KLDO), around 0.36% of its 13F portfolio. Two Sigma Advisors is also relatively very bullish on the stock, setting aside 0.0022 percent of its 13F equity portfolio to KLDO.
Now, key hedge funds were breaking ground themselves. Two Sigma Advisors, managed by John Overdeck and David Siegel, created the biggest position in Kaleido BioSciences, Inc. (NASDAQ:KLDO). Two Sigma Advisors had $0.8 million invested in the company at the end of the quarter. Renaissance Technologies also made a $0.4 million investment in the stock during the quarter. The following funds were also among the new KLDO investors: Ken Griffin’s Citadel Investment Group, Ken Griffin’s Citadel Investment Group, and Michael Gelband’s ExodusPoint Capital.
Let’s now take a look at hedge fund activity in other stocks similar to Kaleido BioSciences, Inc. (NASDAQ:KLDO). These stocks are Uxin Limited (NASDAQ:UXIN), Village Super Market, Inc. (NASDAQ:VLGEA), Cardiff Oncology, Inc. (NASDAQ:CRDF), Central Puerto S.A. (NYSE:CEPU), Vitru Limited (NASDAQ:VTRU), Viracta Therapeutics, Inc. (NASDAQ:VIRX), and Nanobiotix S.A. (NASDAQ:NBTX). This group of stocks’ market valuations match KLDO’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| UXIN | 3 | 5133 | 0 |
| VLGEA | 7 | 30340 | -3 |
| CRDF | 13 | 63864 | -5 |
| CEPU | 3 | 1345 | -1 |
| VTRU | 3 | 8866 | -3 |
| VIRX | 13 | 65765 | 8 |
| NBTX | 5 | 36041 | -1 |
| Average | 6.7 | 30193 | -0.7 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 6.7 hedge funds with bullish positions and the average amount invested in these stocks was $30 million. That figure was $8 million in KLDO’s case. Cardiff Oncology, Inc. (NASDAQ:CRDF) is the most popular stock in this table. On the other hand Uxin Limited (NASDAQ:UXIN) is the least popular one with only 3 bullish hedge fund positions. Kaleido BioSciences, Inc. (NASDAQ:KLDO) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for KLDO is 49.7. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 19.3% in 2021 through June 25th and surpassed the market again by 4.8 percentage points. Unfortunately KLDO wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); KLDO investors were disappointed as the stock returned -9.8% since the end of March (through 6/25) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2021.
Follow Kaleido Biosciences Inc. (NASDAQ:KLDO)
Follow Kaleido Biosciences Inc. (NASDAQ:KLDO)
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Disclosure: None. This article was originally published at Insider Monkey.
