A whopping number of 13F filings filed with U.S. Securities and Exchange Commission has been processed by Insider Monkey so that individual investors can look at the overall hedge fund sentiment towards the stocks included in their watchlists. These freshly-submitted public filings disclose money managers’ equity positions as of the end of the three-month period that ended September 30, so let’s proceed with the discussion of the hedge fund sentiment on Aerie Pharmaceuticals Inc (NASDAQ:AERI).
Aerie Pharmaceuticals Inc (NASDAQ:AERI) has seen an increase in support from the world's most elite money managers lately. Our calculations also showed that AERI isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? 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.
[caption id="attachment_364889" align="aligncenter" width="883"] Jim Tananbaum of Foresite Capital[/caption]
Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world's most bearish hedge fund that's more convinced than ever that a crash is coming, our long-short investment strategy doesn't rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds' buy/sell signals. We're going to analyze the fresh hedge fund action surrounding Aerie Pharmaceuticals Inc (NASDAQ:AERI).
What have hedge funds been doing with Aerie Pharmaceuticals Inc (NASDAQ:AERI)?
At Q3's end, a total of 28 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 56% from the second quarter of 2019. The graph below displays the number of hedge funds with bullish position in AERI over the last 17 quarters. With hedge funds' positions undergoing their usual ebb and flow, there exists an "upper tier" of notable hedge fund managers who were upping their holdings considerably (or already accumulated large positions).
According to Insider Monkey's hedge fund database, James E. Flynn's Deerfield Management has the biggest position in Aerie Pharmaceuticals Inc (NASDAQ:AERI), worth close to $87.8 million, comprising 3.6% of its total 13F portfolio. Coming in second is Jim Tananbaum of Foresite Capital, with a $45.2 million position; 17.2% of its 13F portfolio is allocated to the company. Some other professional money managers that are bullish consist of Christopher James's Partner Fund Management, Steve Cohen's Point72 Asset Management and John A. Levin's Levin Capital Strategies. In terms of the portfolio weights assigned to each position Foresite Capital allocated the biggest weight to Aerie Pharmaceuticals Inc (NASDAQ:AERI), around 17.25% of its portfolio. Sectoral Asset Management is also relatively very bullish on the stock, setting aside 3.62 percent of its 13F equity portfolio to AERI.
As aggregate interest increased, some big names have jumped into Aerie Pharmaceuticals Inc (NASDAQ:AERI) headfirst. Partner Fund Management, managed by Christopher James, created the biggest position in Aerie Pharmaceuticals Inc (NASDAQ:AERI). Partner Fund Management had $35.2 million invested in the company at the end of the quarter. Steve Cohen's Point72 Asset Management also made a $27.2 million investment in the stock during the quarter. The following funds were also among the new AERI investors: Mark Kingdon's Kingdon Capital, Dmitry Balyasny's Balyasny Asset Management, and Ken Greenberg and David Kim's Ghost Tree Capital.
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Aerie Pharmaceuticals Inc (NASDAQ:AERI) but similarly valued. We will take a look at ANI Pharmaceuticals Inc (NASDAQ:ANIP), Twin River Worldwide Holdings Inc. (NYSE:TRWH), QEP Resources Inc (NYSE:QEP), and Upland Software Inc (NASDAQ:UPLD). All of these stocks' market caps match AERI's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ANIP,15,96846,3 TRWH,14,207108,0 QEP,20,155279,2 UPLD,26,185976,2 Average,18.75,161302,1.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 18.75 hedge funds with bullish positions and the average amount invested in these stocks was $161 million. That figure was $324 million in AERI's case. Upland Software Inc (NASDAQ:UPLD) is the most popular stock in this table. On the other hand Twin River Worldwide Holdings Inc. (NYSE:TRWH) is the least popular one with only 14 bullish hedge fund positions. Compared to these stocks Aerie Pharmaceuticals Inc (NASDAQ:AERI) 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 AERI wasn't nearly as popular as these 20 stocks and hedge funds that were betting on AERI were disappointed as the stock returned -1.2% 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.