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In this article we will take a look at whether hedge funds think Acer Therapeutics Inc. (NASDAQ:ACER) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.
Hedge fund interest in Acer Therapeutics Inc. (NASDAQ:ACER) 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 ACER to other stocks including Alimera Sciences Inc (NASDAQ:ALIM), Forum Energy Technologies Inc (NYSE:FET), and Caladrius Biosciences Inc (NASDAQ:CLBS) to get a better sense of its popularity.
Video: 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' 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 S&P 500 ETFs by 44 percentage points since March 2017 (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.
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David Harding of Winton Capital Management[/caption]
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, legendary investor Bill Miller told investors to sell 7 extremely popular recession stocks last month. So, we went through his list and recommended another stock with 100% upside potential instead. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we're going to take a look at the recent hedge fund action encompassing Acer Therapeutics Inc. (NASDAQ:ACER).
How have hedgies been trading Acer Therapeutics Inc. (NASDAQ:ACER)?
Heading into the second quarter of 2020, a total of 3 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from one quarter earlier. On the other hand, there were a total of 8 hedge funds with a bullish position in ACER a year ago. With the smart money's positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were boosting their stakes considerably (or already accumulated large positions).
The largest stake in Acer Therapeutics Inc. (NASDAQ:ACER) was held by Nantahala Capital Management, which reported holding $2 million worth of stock at the end of September. It was followed by Winton Capital Management with a $0 million position. The only other hedge fund that is bullish on the company was Two Sigma Advisors.
Earlier we told you that the aggregate hedge fund interest in the stock was unchanged and we view this as a negative development. Even though there weren't any hedge funds dumping their holdings during the third quarter, there weren't any hedge funds initiating brand new positions. This indicates that hedge funds, at the very best, perceive this stock as dead money and they haven't identified any viable catalysts that can attract investor attention.
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Acer Therapeutics Inc. (NASDAQ:ACER) but similarly valued. We will take a look at Alimera Sciences Inc (NASDAQ:ALIM), Forum Energy Technologies Inc (NYSE:FET), Caladrius Biosciences Inc (NASDAQ:CLBS), and Destination XL Group Inc (NASDAQ:DXLG). This group of stocks' market values are similar to ACER's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ALIM,6,3242,-1 FET,12,1081,-4 CLBS,1,769,0 DXLG,7,6520,0 Average,6.5,2903,-1.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 6.5 hedge funds with bullish positions and the average amount invested in these stocks was $3 million. That figure was $2 million in ACER's case. Forum Energy Technologies Inc (NYSE:FET) is the most popular stock in this table. On the other hand Caladrius Biosciences Inc (NASDAQ:CLBS) is the least popular one with only 1 bullish hedge fund positions. Acer Therapeutics Inc. (NASDAQ:ACER) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 7.9% in 2020 through May 22nd and still beat the market by 15.6 percentage points. A small number of hedge funds were also right about betting on ACER as the stock returned 74.9% during the second quarter and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.