Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed in recent years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets hoping that they will outperform the broader market. Our research shows that certain hedge funds do have great stock picking skills (and we can identify these hedge funds in advance pretty accurately), so let’s take a glance at the smart money sentiment towards LogicBio Therapeutics, Inc. (NASDAQ:LOGC).
LogicBio Therapeutics, Inc. (NASDAQ:LOGC) shares haven’t seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 6 hedge funds’ portfolios at the end of the second quarter of 2019. At the end of this article we will also compare LOGC to other stocks including CapStar Financial Holdings, Inc. (NASDAQ:CSTR), Oil-Dri Corporation of America (NYSE:ODC), and FVCBankcorp, Inc. (NASDAQ:FVCB) to get a better sense of its popularity.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 40 percentage points since May 2014 through May 30, 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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.
n addition to following the biggest hedge funds for investment ideas, we also share stock pitches from conferences, investor letters and other sources like this one where the fund manager is talking about two under the radar 1000% return potential stocks: first one in internet infrastructure and the second in the heart of advertising market. We use hedge fund buy/sell signals to determine whether to conduct in-depth analysis of these stock ideas which take days. Let’s take a look at the latest hedge fund action encompassing LogicBio Therapeutics, Inc. (NASDAQ:LOGC).
How have hedgies been trading LogicBio Therapeutics, Inc. (NASDAQ:LOGC)?
At the end of the second quarter, a total of 6 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the first quarter of 2019. By comparison, 0 hedge funds held shares or bullish call options in LOGC a year ago. With the smart money’s sentiment swirling, there exists a select group of notable hedge fund managers who were increasing their holdings considerably (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, OrbiMed Advisors, managed by Samuel Isaly, holds the largest position in LogicBio Therapeutics, Inc. (NASDAQ:LOGC). OrbiMed Advisors has a $84.1 million position in the stock, comprising 1.3% of its 13F portfolio. On OrbiMed Advisors’s heels is Phill Gross and Robert Atchinson of Adage Capital Management, with a $16.9 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Remaining hedge funds and institutional investors with similar optimism consist of Jeremy Green’s Redmile Group, Robert Pohly’s Samlyn Capital and Didric Cederholm’s Lion Point.
Earlier we told you that the aggregate hedge fund interest in the stock was unchanged and we view this as a negative development. Even though there weren’t any hedge funds dumping their holdings during the second quarter, there weren’t any hedge funds initiating brand new positions. This indicates that hedge funds, at the very best, perceive this stock as dead money and they haven’t identified any viable catalysts that can attract investor attention.
Let’s now take a look at hedge fund activity in other stocks similar to LogicBio Therapeutics, Inc. (NASDAQ:LOGC). These stocks are CapStar Financial Holdings, Inc. (NASDAQ:CSTR), Oil-Dri Corporation of America (NYSE:ODC), FVCBankcorp, Inc. (NASDAQ:FVCB), and Hallmark Financial Services, Inc. (NASDAQ:HALL). This group of stocks’ market valuations are similar to LOGC’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CSTR | 4 | 18034 | -2 |
| ODC | 3 | 32544 | 0 |
| FVCB | 2 | 7616 | -1 |
| HALL | 10 | 33541 | 4 |
| Average | 4.75 | 22934 | 0.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 4.75 hedge funds with bullish positions and the average amount invested in these stocks was $23 million. That figure was $128 million in LOGC’s case. Hallmark Financial Services, Inc. (NASDAQ:HALL) is the most popular stock in this table. On the other hand FVCBankcorp, Inc. (NASDAQ:FVCB) is the least popular one with only 2 bullish hedge fund positions. LogicBio Therapeutics, Inc. (NASDAQ:LOGC) 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 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately LOGC wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on LOGC were disappointed as the stock returned -16.8% during the third quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.