Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips or bumps on the charts usually don't make them change their opinion towards a company. This time it may be different. The coronavirus pandemic destroyed the high correlations among major industries and asset classes. We are now in a stock pickers market where fundamentals of a stock have more effect on the price than the overall direction of the market. As a result we observe sudden and large changes in hedge fund positions depending on the news flow. Let’s take a look at the hedge fund sentiment towards Achieve Life Sciences, Inc. (NASDAQ:ACHV) to find out whether there were any major changes in hedge funds' views.
Hedge fund interest in Achieve Life Sciences, Inc. (NASDAQ:ACHV) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that ACHV isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings). At the end of this article we will also compare ACHV to other stocks including Jerash Holdings (US), Inc. (NASDAQ:JRSH), Ark Restaurants Corp. (NASDAQ:ARKR), and Chembio Diagnostics Inc (NASDAQ:CEMI) to get a better sense of its popularity.
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 S&P 500 ETFs by more than 115 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.
Ken Griffin of Citadel Investment Group
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, an activist hedge fund wants to buy this $26 biotech stock for $50. So, we recommended a long position to our monthly premium newsletter subscribers. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Now let's check out the new hedge fund action regarding Achieve Life Sciences, Inc. (NASDAQ:ACHV).
Do Hedge Funds Think ACHV Is A Good Stock To Buy Now?
At the end of the first quarter, a total of 3 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the fourth quarter of 2020. By comparison, 5 hedge funds held shares or bullish call options in ACHV a year ago. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Achieve Life Sciences, Inc. (NASDAQ:ACHV) was held by Ikarian Capital, which reported holding $3.3 million worth of stock at the end of December. It was followed by Renaissance Technologies with a $0.3 million position. The only other hedge fund that is bullish on the company was Citadel Investment Group.
Due to the fact that Achieve Life Sciences, Inc. (NASDAQ:ACHV) has faced falling interest from the smart money, it's easy to see that there was a specific group of money managers that elected to cut their entire stakes heading into Q2. It's worth mentioning that Charles Paquelet's Skylands Capital said goodbye to the largest investment of all the hedgies watched by Insider Monkey, valued at close to $0.2 million in stock. Israel Englander's fund, Millennium Management, also sold off its stock, about $0.2 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Achieve Life Sciences, Inc. (NASDAQ:ACHV) but similarly valued. We will take a look at Jerash Holdings (US), Inc. (NASDAQ:JRSH), Ark Restaurants Corp. (NASDAQ:ARKR), Chembio Diagnostics Inc (NASDAQ:CEMI), Vertex Energy Inc (NASDAQ:VTNR), ImmuCell Corporation (NASDAQ:ICCC), Hudson Technologies, Inc. (NASDAQ:HDSN), and Dare Bioscience, Inc. (NASDAQ:DARE). This group of stocks' market caps are similar to ACHV's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position JRSH,2,1527,0 ARKR,1,1213,0 CEMI,7,3452,1 VTNR,5,4142,0 ICCC,2,1921,0 HDSN,3,664,0 DARE,3,1717,0 Average,3.3,2091,0.1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 3.3 hedge funds with bullish positions and the average amount invested in these stocks was $2 million. That figure was $4 million in ACHV's case. Chembio Diagnostics Inc (NASDAQ:CEMI) is the most popular stock in this table. On the other hand Ark Restaurants Corp. (NASDAQ:ARKR) is the least popular one with only 1 bullish hedge fund positions. Achieve Life Sciences, Inc. (NASDAQ:ACHV) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for ACHV is 39.7. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. This is a slightly negative signal and we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 17.2% in 2021 through June 11th and surpassed the market again by 3.3 percentage points. Unfortunately ACHV wasn't nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); ACHV investors were disappointed as the stock returned -24.8% since the end of March (through 6/11) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2021.
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Disclosure: None. This article was originally published at Insider Monkey.