Before we spend days researching a stock idea we like to take a look at how hedge funds and billionaire investors recently traded that stock. Russell 2000 ETF (IWM) lagged the larger S&P 500 ETF (SPY) by more than 10 percentage points since the end of the third quarter of 2018. This means hedge funds that are allocating a higher percentage of their portfolio to small-cap stocks were probably underperforming the market. However, this also means that as small-cap stocks start to mean revert, these hedge funds will start delivering better returns than the S&P 500 Index funds. In this article, we will take a look at what hedge funds think about Kindred Biosciences Inc (NASDAQ:KIN).
Kindred Biosciences Inc (NASDAQ:KIN) has seen a decrease in activity from the world’s largest hedge funds in recent months. Our calculations also showed that KIN isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
If you’d ask most stock holders, hedge funds are seen as unimportant, outdated investment tools of the past. While there are over 8000 funds trading at present, Our researchers hone in on the top tier of this group, around 750 funds. These money managers manage the majority of the hedge fund industry’s total asset base, and by keeping track of their unrivaled equity investments, Insider Monkey has uncovered various investment strategies that have historically outrun the broader indices. Insider Monkey’s flagship short hedge fund strategy outperformed the S&P 500 short ETFs by around 20 percentage points annually since its inception in May 2014. Our portfolio of short stocks lost 27.8% since February 2017 (through November 21st) even though the market was up more than 39% during the same period. We just shared a list of 7 short targets in our latest quarterly update .
John Rogers of Ariel Investments
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 review the latest hedge fund action surrounding Kindred Biosciences Inc (NASDAQ:KIN).
Hedge fund activity in Kindred Biosciences Inc (NASDAQ:KIN)
Heading into the fourth quarter of 2019, a total of 7 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -22% from the second quarter of 2019. The graph below displays the number of hedge funds with bullish position in KIN over the last 17 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Park West Asset Management held the most valuable stake in Kindred Biosciences Inc (NASDAQ:KIN), which was worth $46.2 million at the end of the third quarter. On the second spot was Ariel Investments which amassed $13.1 million worth of shares. Adage Capital Management, Renaissance Technologies, and Millennium Management 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 Park West Asset Management allocated the biggest weight to Kindred Biosciences Inc (NASDAQ:KIN), around 2.25% of its 13F portfolio. Ariel Investments is also relatively very bullish on the stock, setting aside 0.17 percent of its 13F equity portfolio to KIN.
Since Kindred Biosciences Inc (NASDAQ:KIN) has faced a decline in interest from the smart money, it’s easy to see that there was a specific group of fund managers who were dropping their entire stakes last quarter. It’s worth mentioning that David Rosen’s Rubric Capital Management cut the largest investment of the “upper crust” of funds watched by Insider Monkey, valued at close to $2.5 million in stock. Anand Parekh’s fund, Alyeska Investment Group, also cut its stock, about $2.4 million worth. These moves are interesting, as total hedge fund interest dropped by 2 funds last quarter.
Let’s go over hedge fund activity in other stocks similar to Kindred Biosciences Inc (NASDAQ:KIN). These stocks are Provention Bio, Inc. (NASDAQ:PRVB), Cedar Realty Trust Inc (NYSE:CDR), Greenhill & Co., Inc. (NYSE:GHL), and Pfenex Inc (NYSEAMERICAN:PFNX). This group of stocks’ market values match KIN’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| PRVB | 8 | 15344 | 5 |
| CDR | 10 | 16965 | -3 |
| GHL | 11 | 21075 | 0 |
| PFNX | 14 | 35852 | 2 |
| Average | 10.75 | 22309 | 1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 10.75 hedge funds with bullish positions and the average amount invested in these stocks was $22 million. That figure was $80 million in KIN’s case. Pfenex Inc (NYSEAMERICAN:PFNX) is the most popular stock in this table. On the other hand Provention Bio, Inc. (NASDAQ:PRVB) is the least popular one with only 8 bullish hedge fund positions. Compared to these stocks Kindred Biosciences Inc (NASDAQ:KIN) is even less popular than PRVB. Hedge funds clearly dropped the ball on KIN as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. A small number of hedge funds were also right about betting on KIN as the stock returned 14.9% during the fourth quarter (through the end of November) and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.
