Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed in recent years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets hoping that they will outperform the broader market. Our research shows that certain hedge funds do have great stock picking skills (and we can identify these hedge funds in advance pretty accurately), so let’s take a glance at the smart money sentiment towards Aquestive Therapeutics, Inc. (NASDAQ:AQST).
Is AQST a good stock to buy? Aquestive Therapeutics, Inc. (NASDAQ:AQST) shareholders have witnessed a decrease in support from the world's most elite money managers recently. Aquestive Therapeutics, Inc. (NASDAQ:AQST) was in 5 hedge funds' portfolios at the end of March. The all time high for this statistic is 15. There were 9 hedge funds in our database with AQST holdings at the end of December. Our calculations also showed that AQST isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings).
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. Hedge funds have more than $3.5 trillion in assets under management, so you can't expect their entire portfolios to beat the market by large margins. Our research was 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). So you can still find a lot of gems by following hedge funds' moves today.
Cliff Asness of AQR Capital Management
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, an activist hedge fund owns nearly 40% of this $23 biotech stock and is trying to buy the rest for around $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 we're going to take a look at the key hedge fund action surrounding Aquestive Therapeutics, Inc. (NASDAQ:AQST).
Do Hedge Funds Think AQST Is A Good Stock To Buy Now?
Heading into the second quarter of 2021, a total of 5 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -44% from one quarter earlier. On the other hand, there were a total of 9 hedge funds with a bullish position in AQST a year ago. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Of the funds tracked by Insider Monkey, Nancy Zimmerman and Gabriel Sunshine's Bracebridge Capital has the most valuable position in Aquestive Therapeutics, Inc. (NASDAQ:AQST), worth close to $2.2 million, comprising 0.2% of its total 13F portfolio. Coming in second is Citadel Investment Group, managed by Ken Griffin, which holds a $0.4 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Other professional money managers with similar optimism include Greg Eisner's Engineers Gate Manager, and Cliff Asness's AQR Capital Management. In terms of the portfolio weights assigned to each position Bracebridge Capital allocated the biggest weight to Aquestive Therapeutics, Inc. (NASDAQ:AQST), around 0.19% of its 13F portfolio. Engineers Gate Manager is also relatively very bullish on the stock, dishing out 0.01 percent of its 13F equity portfolio to AQST.
Because Aquestive Therapeutics, Inc. (NASDAQ:AQST) has witnessed declining sentiment from hedge fund managers, logic holds that there was a specific group of money managers who sold off their entire stakes by the end of the first quarter. At the top of the heap, Joseph Edelman's Perceptive Advisors cut the biggest investment of all the hedgies tracked by Insider Monkey, totaling close to $7.4 million in stock. Renaissance Technologies, also cut its stock, about $1.5 million worth. These moves are intriguing to say the least, as total hedge fund interest was cut by 4 funds by the end of the first quarter.
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Aquestive Therapeutics, Inc. (NASDAQ:AQST) but similarly valued. We will take a look at CPS Technologies Corp. (NASDAQ:CPSH), Ur-Energy Inc. (NYSE:URG), ObsEva SA (NASDAQ:OBSV), Genprex, Inc. (NASDAQ:GNPX), Midwest Holding Inc. (NASDAQ:MDWT), MOGU Inc. (NYSE:MOGU), and ChoiceOne Financial Services, Inc. (NASDAQ:COFS). All of these stocks' market caps resemble AQST's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CPSH,4,4960,4 URG,4,6017,0 OBSV,3,1554,-1 GNPX,5,2388,4 MDWT,7,23330,-2 MOGU,3,21358,-3 COFS,1,402,-1 Average,3.9,8573,0.1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 3.9 hedge funds with bullish positions and the average amount invested in these stocks was $9 million. That figure was $3 million in AQST's case. Midwest Holding Inc. (NASDAQ:MDWT) is the most popular stock in this table. On the other hand ChoiceOne Financial Services, Inc. (NASDAQ:COFS) is the least popular one with only 1 bullish hedge fund positions. Aquestive Therapeutics, Inc. (NASDAQ:AQST) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for AQST is 44.3. 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 positive signal but 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 17.4% in 2021 through June 18th and beat the market again by 6.1 percentage points. Unfortunately AQST wasn't nearly as popular as these 5 stocks and hedge funds that were betting on AQST were disappointed as the stock returned -21.7% since the end of March (through 6/18) 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 many of these stocks already outperformed the market since 2019.
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Disclosure: None. This article was originally published at Insider Monkey.