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Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds' and successful investors' positions as of the end of the fourth quarter. You can find articles about an individual hedge fund's trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 6 years and analyze what the smart money thinks of Ascendis Pharma A/S (NASDAQ:ASND) based on that data.
Is ASND a good stock to buy? Money managers were getting less optimistic. The number of long hedge fund positions dropped by 3 lately. Ascendis Pharma A/S (NASDAQ:ASND) was in 28 hedge funds' portfolios at the end of the first quarter of 2021. The all time high for this statistic is 38. Our calculations also showed that ASND isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings). There were 31 hedge funds in our database with ASND holdings at the end of December.
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 115 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.
Peter Kolchinsky of RA Capital Management
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, economists warn of inflation flare up. So, we are checking out this backdoor gold play that has hit peak gains of 718% in a little over a year. 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. With all of this in mind let's take a peek at the recent hedge fund action encompassing Ascendis Pharma A/S (NASDAQ:ASND).
Do Hedge Funds Think ASND Is A Good Stock To Buy Now?
At first quarter's end, a total of 28 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -10% from one quarter earlier. By comparison, 33 hedge funds held shares or bullish call options in ASND a year ago. With hedgies' positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were upping their stakes substantially (or already accumulated large positions).
Among these funds, RA Capital Management held the most valuable stake in Ascendis Pharma A/S (NASDAQ:ASND), which was worth $826.4 million at the end of the fourth quarter. On the second spot was Baker Bros. Advisors which amassed $456.3 million worth of shares. Vivo Capital, Lone Pine Capital, and Farallon Capital were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position RA Capital Management allocated the biggest weight to Ascendis Pharma A/S (NASDAQ:ASND), around 12.46% of its 13F portfolio. Vivo Capital is also relatively very bullish on the stock, dishing out 7.54 percent of its 13F equity portfolio to ASND.
Seeing as Ascendis Pharma A/S (NASDAQ:ASND) has witnessed falling interest from the aggregate hedge fund industry, it's easy to see that there is a sect of money managers that decided to sell off their positions entirely by the end of the first quarter. At the top of the heap, Behzad Aghazadeh's Avoro Capital Advisors (venBio Select Advisor) sold off the largest investment of the "upper crust" of funds tracked by Insider Monkey, comprising an estimated $300.2 million in stock. Doron Breen and Mori Arkin's fund, Sphera Global Healthcare Fund, also said goodbye to its stock, about $3.9 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest was cut by 3 funds by the end of the first quarter.
Let's now take a look at hedge fund activity in other stocks similar to Ascendis Pharma A/S (NASDAQ:ASND). These stocks are TopBuild Corp (NYSE:BLD), Lumentum Holdings Inc (NASDAQ:LITE), Coty Inc (NYSE:COTY), Denali Therapeutics Inc. (NASDAQ:DNLI), TFI International Inc. (NYSE:TFII), Cullen/Frost Bankers, Inc. (NYSE:CFR), and ADT Inc. (NYSE:ADT). This group of stocks' market caps match ASND's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position BLD,18,103995,-1 LITE,31,329570,-8 COTY,25,262735,3 DNLI,26,250609,6 TFII,19,164356,9 CFR,11,18887,-6 ADT,16,283810,-8 Average,20.9,201995,-0.7 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 20.9 hedge funds with bullish positions and the average amount invested in these stocks was $202 million. That figure was $2078 million in ASND's case. Lumentum Holdings Inc (NASDAQ:LITE) is the most popular stock in this table. On the other hand Cullen/Frost Bankers, Inc. (NYSE:CFR) is the least popular one with only 11 bullish hedge fund positions. Ascendis Pharma A/S (NASDAQ:ASND) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for ASND is 66.6. 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 24% in 2021 through July 9th and beat the market again by 6.7 percentage points. Unfortunately ASND wasn't nearly as popular as these 5 stocks and hedge funds that were betting on ASND were disappointed as the stock returned -2.2% since the end of March (through 7/9) 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.