Hedge funds are not perfect. They have their bad picks just like everyone else. Facebook, a stock hedge funds have loved dearly, lost nearly 40% of its value at one point in 2018. Although hedge funds are not perfect, their consensus picks do deliver solid returns, however. Our data show the top 20 S&P 500 stocks among hedge funds beat the S&P 500 Index by nearly 10 percentage points so far in 2019. Because hedge funds have a lot of resources and their consensus picks do well, we pay attention to what they think. In this article, we analyze what the elite funds think of Zafgen Inc (NASDAQ:ZFGN).
Is Zafgen Inc (NASDAQ:ZFGN) worth your attention right now? The smart money is reducing their bets on the stock. The number of bullish hedge fund bets dropped by 2 lately. Our calculations also showed that ZFGN 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 investors, hedge funds are viewed as unimportant, old financial vehicles of years past. While there are over 8000 funds with their doors open at the moment, We hone in on the moguls of this club, approximately 750 funds. These money managers direct bulk of the smart money’s total capital, and by shadowing their first-class picks, Insider Monkey has brought to light many investment strategies that have historically defeated Mr. Market. Insider Monkey’s flagship short hedge fund strategy surpassed the S&P 500 short ETFs by around 20 percentage points per annum 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 .
Nathaniel August of Mangrove Partners
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. 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 also rely on the best performing hedge funds‘ buy/sell signals. Let’s take a look at the recent hedge fund action regarding Zafgen Inc (NASDAQ:ZFGN).
What does smart money think about Zafgen Inc (NASDAQ:ZFGN)?
At Q3’s end, a total of 12 of the hedge funds tracked by Insider Monkey were long this stock, a change of -14% from the previous quarter. By comparison, 19 hedge funds held shares or bullish call options in ZFGN a year ago. With hedgies’ sentiment swirling, there exists a few noteworthy hedge fund managers who were adding to their stakes meaningfully (or already accumulated large positions).
Among these funds, 683 Capital Partners held the most valuable stake in Zafgen Inc (NASDAQ:ZFGN), which was worth $1.7 million at the end of the third quarter. On the second spot was Renaissance Technologies which amassed $1.6 million worth of shares. EcoR1 Capital, Farallon Capital, and Mangrove Partners 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 683 Capital Partners allocated the biggest weight to Zafgen Inc (NASDAQ:ZFGN), around 0.19% of its 13F portfolio. EcoR1 Capital is also relatively very bullish on the stock, earmarking 0.18 percent of its 13F equity portfolio to ZFGN.
Judging by the fact that Zafgen Inc (NASDAQ:ZFGN) has witnessed bearish sentiment from the entirety of the hedge funds we track, logic holds that there were a few hedgies that slashed their entire stakes in the third quarter. It’s worth mentioning that Jeffrey Jay and David Kroin’s Great Point Partners sold off the biggest position of all the hedgies watched by Insider Monkey, totaling close to $2.6 million in stock, and Steven Boyd’s Armistice Capital was right behind this move, as the fund cut about $2.6 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest fell by 2 funds in the third quarter.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Zafgen Inc (NASDAQ:ZFGN) but similarly valued. These stocks are Bio-Path Holdings, Inc. (NASDAQ:BPTH), BioHiTech Global, Inc. (NASDAQ:BHTG), Caladrius Biosciences Inc (NASDAQ:CLBS), and FlexShopper, Inc. (NASDAQ:FPAY). This group of stocks’ market caps match ZFGN’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| BPTH | 1 | 444 | -1 |
| BHTG | 1 | 103 | 0 |
| CLBS | 1 | 1015 | 0 |
| FPAY | 1 | 434 | -1 |
| Average | 1 | 499 | -0.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 1 hedge funds with bullish positions and the average amount invested in these stocks was $0 million. That figure was $9 million in ZFGN’s case. Bio-Path Holdings, Inc. (NASDAQ:BPTH) is the most popular stock in this table. On the other hand Bio-Path Holdings, Inc. (NASDAQ:BPTH) is the least popular one with only 1 bullish hedge fund positions. Compared to these stocks Zafgen Inc (NASDAQ:ZFGN) is more popular among hedge funds. 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. Hedge funds were also right about betting on ZFGN, though not to the same extent, as the stock returned 9.6% during the fourth quarter (through the end of November) and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.
