Hedge Funds and other institutional investors have just completed filing their 13Fs with the Securities and Exchange Commission, revealing their equity portfolios as of the end of June. At Insider Monkey, we follow nearly 750 active hedge funds and notable investors and by analyzing their 13F filings, we can determine the stocks that they are collectively bullish on. One of their picks is Lineage Cell Therapeutics, Inc. (NYSE:LCTX), so let’s take a closer look at the sentiment that surrounds it in the current quarter.
Hedge fund interest in Lineage Cell Therapeutics, Inc. (NYSE:LCTX) shares was flat at the end of last quarter. This is usually a negative indicator. At the end of this article we will also compare LCTX to other stocks including Scully Royalty Ltd. (NYSE:SRL), Colony Bankcorp Inc (NASDAQ:CBAN), and StoneCastle Financial Corp (NASDAQ:BANX) 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.
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’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Nathan Fischel of DAFNA Capital Management
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. With all of this in mind let’s take a glance at the latest hedge fund action regarding Lineage Cell Therapeutics, Inc. (NYSE:LCTX).
What does smart money think about Lineage Cell Therapeutics, Inc. (NYSE:LCTX)?
Heading into the fourth quarter of 2019, a total of 5 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the previous quarter. On the other hand, there were a total of 5 hedge funds with a bullish position in LCTX a year ago. With hedge funds’ capital changing hands, there exists a select group of notable hedge fund managers who were adding to their holdings significantly (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Neal C. Bradsher’s Broadwood Capital has the biggest position in Lineage Cell Therapeutics, Inc. (NYSEAMERICAN:LCTX), worth close to $33.3 million, amounting to 4.6% of its total 13F portfolio. Sitting at the No. 2 spot is John Overdeck and David Siegel of Two Sigma Advisors, with a $0.2 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Some other peers that are bullish contain Nathan Fischel’s DAFNA Capital Management, Ken Griffin’s Citadel Investment Group and David E. Shaw’s D E Shaw. In terms of the portfolio weights assigned to each position Broadwood Capital allocated the biggest weight to Lineage Cell Therapeutics, Inc. (NYSEAMERICAN:LCTX), around 4.63% of its 13F portfolio. DAFNA Capital Management is also relatively very bullish on the stock, dishing out 0.03 percent of its 13F equity portfolio to LCTX.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: 999. One hedge fund selling its entire position doesn’t always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don’t think this is the case in this case because only one of the 800+ hedge funds tracked by Insider Monkey identified as a viable investment and initiated a position in the stock (that fund was Broadwood Capital).
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Lineage Cell Therapeutics, Inc. (NYSEAMERICAN:LCTX) but similarly valued. These stocks are Scully Royalty Ltd. (NYSE:SRL), Colony Bankcorp Inc (NASDAQ:CBAN), StoneCastle Financial Corp (NASDAQ:BANX), and G. Willi-Food International Limited (NASDAQ:WILC). This group of stocks’ market valuations match LCTX’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SRL | 2 | 10530 | 0 |
| CBAN | 3 | 9572 | -1 |
| BANX | 1 | 222 | 0 |
| WILC | 2 | 18900 | 0 |
| Average | 2 | 9806 | -0.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 2 hedge funds with bullish positions and the average amount invested in these stocks was $10 million. That figure was $34 million in LCTX’s case. Colony Bankcorp Inc (NASDAQ:CBAN) is the most popular stock in this table. On the other hand StoneCastle Financial Corp (NASDAQ:BANX) is the least popular one with only 1 bullish hedge fund positions. Compared to these stocks Lineage Cell Therapeutics, Inc. (NYSEAMERICAN:LCTX) 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. Unfortunately LCTX wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on LCTX were disappointed as the stock returned -8.2% during the first two months of the fourth 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 70 percent of these stocks already outperformed the market in Q4.
Disclosure: None. This article was originally published at Insider Monkey.