This Metric Says It May Be Time to Buy Achillion Pharmaceuticals, Inc. (ACHN)

There are several ways to beat the market, and investing in small cap stocks has historically been one of them. We like to improve the odds of beating the market further by examining what famous hedge fund operators such as Carl Icahn and George Soros think. Those hedge fund operators make billions of dollars each year by hiring the best and the brightest to do research on stocks, including small cap stocks that big brokerage houses simply don’t cover. Because of Carl Icahn and other elite funds’ exemplary historical records, we pay attention to their small cap picks. In this article, we use hedge fund filing data to analyze Achillion Pharmaceuticals, Inc. (NASDAQ:ACHN).

Achillion Pharmaceuticals, Inc. (NASDAQ:ACHN) has experienced an increase in hedge fund interest recently. ACHN was in 27 hedge funds’ portfolios at the end of the third quarter of 2016. There were 22 hedge funds in our database with ACHN holdings at the end of the previous quarter. At the end of this article we will also compare ACHN to other stocks including Multi-Color Corporation (NASDAQ:LABL), Abaxis Inc (NASDAQ:ABAX), and Redwood Trust, Inc. (NYSE:RWT) to get a better sense of its popularity.

At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.

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How have hedgies been trading Achillion Pharmaceuticals, Inc. (NASDAQ:ACHN)?

At the end of the third quarter, a total of 27 of the hedge funds tracked by Insider Monkey were bullish on this stock, a gain of 23% from the second quarter of 2016, after several quarters of largely flat sentiment. With the smart money’s capital changing hands, there exists a few noteworthy hedge fund managers who were boosting their holdings significantly (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 biggest position in Achillion Pharmaceuticals, Inc. (NASDAQ:ACHN). OrbiMed Advisors has a $106.2 million position in the stock, comprising 1.2% of its 13F portfolio. The second largest stake is held by RA Capital Management, led by Peter Kolchinsky, holding a $97.5 million position; the fund has 10.1% of its 13F portfolio invested in the stock. Other professional money managers that are bullish include Steve Cohen’s Point72 Asset Management, Julian Baker and Felix Baker’s Baker Bros. Advisors, and Kris Jenner, Gordon Bussard, Graham McPhail’s Rock Springs Capital Management.

As one would reasonably expect, specific money managers have jumped into Achillion Pharmaceuticals, Inc. (NASDAQ:ACHN) headfirst. Perceptive Advisors, managed by Joseph Edelman, assembled the largest position in Achillion Pharmaceuticals, Inc. (NASDAQ:ACHN). Perceptive Advisors had $7.5 million invested in the company at the end of the quarter. Jason Karp’s Tourbillon Capital Partners also made a $7.5 million investment in the stock during the quarter. The other funds with brand new ACHN positions are Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Jim Simons’ Renaissance Technologies, and Anders Hove and Bong Koh’s VHCP Management.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Achillion Pharmaceuticals, Inc. (NASDAQ:ACHN) but similarly valued. We will take a look at Multi-Color Corporation (NASDAQ:LABL), Abaxis Inc (NASDAQ:ABAX), Redwood Trust, Inc. (NYSE:RWT), and Badger Meter, Inc. (NYSE:BMI). All of these stocks’ market caps are similar to ACHN’s market cap.

As you can see these stocks had an average of 10 hedge funds with bullish positions and the average amount invested in these stocks was $65 million. That figure was $349 million in ACHN’s case. Badger Meter, Inc. (NYSE:BMI) is the most popular stock in this table. On the other hand Multi-Color Corporation (NASDAQ:LABL) is the least popular one with only 7 bullish hedge fund positions. Compared to these stocks Achillion Pharmaceuticals, Inc. (NASDAQ:ACHN) is more popular among hedge funds. Considering that hedge funds are extremely fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.

Disclosure: None