"Market conditions are changing. The continued rise in interest rates suggests we are in the early stages of a bond bear market, which could intensify as central banks withdraw liquidity. The receding tide of liquidity will start to reveal more rocks beyond what has been exposed in emerging markets so far, and the value of a value discipline will be in avoiding the biggest capital-destroying rocks. If a rock emerges on the crowded shore of U.S. momentum, it could result in a major liquidity challenge, as momentum is often most intense on the downside as a crowded trade reverses. So investors are facing a large potential trade-off right now: continue to bet on the current dominance of momentum and the S&P 500, or bet on change and take an active value bet in names with attractive value and optionality, but with negative momentum," said Clearbridge Investments in its market commentary. We aren't sure whether long-term interest rates will top 5% and value stocks outperform growth, but we follow hedge fund investor letters to understand where the markets and stocks might be going. This article will lay out and discuss the hedge fund and institutional investor sentiment towards Abeona Therapeutics Inc (NASDAQ:ABEO).
Is Abeona Therapeutics Inc (NASDAQ:ABEO) a buy right now? Hedge funds are getting more optimistic. The number of bullish hedge fund bets went up by 2 in recent months. Our calculations also showed that ABEO isn't among the 30 most popular stocks among hedge funds. ABEO was in 22 hedge funds' portfolios at the end of the third quarter of 2018. There were 20 hedge funds in our database with ABEO holdings at the end of the previous quarter.
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 18 percentage points since May 2014 through December 3, 2018 (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.
We're going to take a look at the latest hedge fund action regarding Abeona Therapeutics Inc (NASDAQ:ABEO).
Hedge fund activity in Abeona Therapeutics Inc (NASDAQ:ABEO)
At Q3's end, a total of 22 of the hedge funds tracked by Insider Monkey were long this stock, a change of 10% from the previous quarter. By comparison, 20 hedge funds held shares or bullish call options in ABEO heading into this year. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Abeona Therapeutics Inc (NASDAQ:ABEO) was held by Knoll Capital Management, which reported holding $29.6 million worth of stock at the end of September. It was followed by Baker Bros. Advisors with a $28 million position. Other investors bullish on the company included Adage Capital Management, Nexthera Capital, and Viking Global.
As industrywide interest jumped, key hedge funds were breaking ground themselves. Marshall Wace LLP, managed by Paul Marshall and Ian Wace, created the most outsized position in Abeona Therapeutics Inc (NASDAQ:ABEO). Marshall Wace LLP had $3.8 million invested in the company at the end of the quarter. Noam Gottesman's GLG Partners also initiated a $0.3 million position during the quarter. The only other fund with a brand new ABEO position is Jerome Pfund and Michael Sjostrom's Sectoral Asset Management.
Let's check out hedge fund activity in other stocks - not necessarily in the same industry as Abeona Therapeutics Inc (NASDAQ:ABEO) but similarly valued. We will take a look at Bonanza Creek Energy Inc (NYSE:BCEI), Invesco Quality Municipal Inc Trust (NYSE:IQI), NextDecade Corporation (NASDAQ:NEXT), and CIM Commercial Trust Corporation (NASDAQ:CMCT). This group of stocks' market values resemble ABEO's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position BCEI,16,213078,-6 IQI,4,2152,0 NEXT,6,478088,-2 CMCT,1,295,1 Average,6.75,173403,-1.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 6.75 hedge funds with bullish positions and the average amount invested in these stocks was $173 million. That figure was $142 million in ABEO's case. Bonanza Creek Energy Inc (NYSE:BCEI) is the most popular stock in this table. On the other hand 0 is the least popular one with only 1 bullish hedge fund positions. Compared to these stocks Abeona Therapeutics Inc (NASDAQ:ABEO) is more popular among hedge funds. Considering that hedge funds are 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. This article was originally published at Insider Monkey.