After several tireless days we have finished crunching the numbers from nearly 750 13F filings issued by the elite hedge funds and other investment firms that we track at Insider Monkey, which disclosed those firms’ equity portfolios as of September 30th. The results of that effort will be put on display in this article, as we share valuable insight into the smart money sentiment towards Zosano Pharma Corp (NASDAQ:ZSAN).
Is Zosano Pharma Corp (NASDAQ:ZSAN) going to take off soon? The smart money is taking a bullish view. The number of bullish hedge fund positions went up by 1 recently. Our calculations also showed that ZSAN isn’t among the 30 most popular stocks among hedge funds. ZSAN was in 3 hedge funds’ portfolios at the end of September. There were 2 hedge funds in our database with ZSAN positions at the end of the previous quarter.
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 Russell 2000 ETFs by 40 percentage points since May 2014 (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.
Phill Gross of Adage Capital Management
Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world’s most bearish hedge fund that’s more convinced than ever that a crash is coming, our long-short investment strategy doesn’t rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds‘ buy/sell signals. Let’s take a glance at the recent hedge fund action surrounding Zosano Pharma Corp (NASDAQ:ZSAN).
What does smart money think about Zosano Pharma Corp (NASDAQ:ZSAN)?
At the end of the third quarter, a total of 3 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 50% from the second quarter of 2019. On the other hand, there were a total of 5 hedge funds with a bullish position in ZSAN a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
When looking at the institutional investors followed by Insider Monkey, Adage Capital Management, managed by Phill Gross and Robert Atchinson, holds the biggest position in Zosano Pharma Corp (NASDAQ:ZSAN). Adage Capital Management has a $1.6 million position in the stock, comprising less than 0.1%% of its 13F portfolio. Sitting at the No. 2 spot is Anand Parekh of Alyeska Investment Group, with a $0.7 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. In terms of the portfolio weights assigned to each position Alyeska Investment Group allocated the biggest weight to Zosano Pharma Corp (NASDAQ:ZSAN), around 0.01% of its portfolio. Adage Capital Management is also relatively very bullish on the stock, earmarking 0.0038 percent of its 13F equity portfolio to ZSAN.
There weren’t any hedge funds initiating brand new positions in the stock during the third quarter.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Zosano Pharma Corp (NASDAQ:ZSAN) but similarly valued. We will take a look at Pacific Ethanol Inc (NASDAQ:PEIX), Aerpio Pharmaceuticals, Inc. (NASDAQ:ARPO), ContraFect Corp (NASDAQ:CFRX), and Zafgen Inc (NASDAQ:ZFGN). This group of stocks’ market caps are closest to ZSAN’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| PEIX | 3 | 1737 | -1 |
| ARPO | 3 | 3654 | 1 |
| CFRX | 6 | 3054 | -1 |
| ZFGN | 12 | 8736 | -2 |
| Average | 6 | 4295 | -0.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 6 hedge funds with bullish positions and the average amount invested in these stocks was $4 million. That figure was $2 million in ZSAN’s case. Zafgen Inc (NASDAQ:ZFGN) is the most popular stock in this table. On the other hand Pacific Ethanol Inc (NASDAQ:PEIX) is the least popular one with only 3 bullish hedge fund positions. Compared to these stocks Zosano Pharma Corp (NASDAQ:ZSAN) is even less popular than PEIX. Our calculations showed that top 20 most popular stocks among hedge funds returned 34.7% in 2019 through November 22nd and outperformed the S&P 500 ETF (SPY) by 8.5 percentage points. A small number of hedge funds were also right about betting on ZSAN, though not to the same extent, as the stock returned 5.1% during the fourth quarter (through 11/22) and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.
