Concerns over rising interest rates and expected further rate increases have hit several stocks hard since the end of the third quarter. NASDAQ and Russell 2000 indices are already in correction territory. More importantly, Russell 2000 ETF (IWM) underperformed the larger S&P 500 ETF (SPY) by about 4 percentage points in the first half of the fourth quarter. Hedge funds and institutional investors tracked by Insider Monkey usually invest a disproportionate amount of their portfolios in smaller cap stocks. We have been receiving indications that hedge funds were paring back their overall exposure and this is one of the factors behind the recent movements in major indices. In this article, we will take a closer look at hedge fund sentiment towards Achillion Pharmaceuticals, Inc. (NASDAQ:ACHN).
Achillion Pharmaceuticals, Inc. (NASDAQ:ACHN) investors should be aware of an increase in enthusiasm from smart money lately. ACHN was in 23 hedge funds' portfolios at the end of September. There were 18 hedge funds in our database with ACHN holdings at the end of the previous quarter. Our calculations also showed that ACHN isn't among the 30 most popular stocks among hedge funds.
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 market by 18 percentage points since May 2014 through December 3, 2018 (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 24% through December 3, 2018. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Let's take a look at the key hedge fund action encompassing Achillion Pharmaceuticals, Inc. (NASDAQ:ACHN).
How are hedge funds trading Achillion Pharmaceuticals, Inc. (NASDAQ:ACHN)?
Heading into the fourth quarter of 2018, a total of 23 of the hedge funds tracked by Insider Monkey were long this stock, a change of 28% from one quarter earlier. By comparison, 21 hedge funds held shares or bullish call options in ACHN heading into this year. With hedge funds' sentiment swirling, there exists a few notable hedge fund managers who were upping their stakes considerably (or already accumulated large positions).
More specifically, Citadel Investment Group was the largest shareholder of Achillion Pharmaceuticals, Inc. (NASDAQ:ACHN), with a stake worth $15.4 million reported as of the end of September. Trailing Citadel Investment Group was Rock Springs Capital Management, which amassed a stake valued at $8.8 million. Armistice Capital, MAK Capital One, and Point72 Asset Management were also very fond of the stock, giving the stock large weights in their portfolios.
As one would reasonably expect, some big names were leading the bulls' herd. MAK Capital One, managed by Michael Kaufman, assembled the most valuable position in Achillion Pharmaceuticals, Inc. (NASDAQ:ACHN). MAK Capital One had $7.2 million invested in the company at the end of the quarter. Steve Cohen's Point72 Asset Management also made a $6.6 million investment in the stock during the quarter. The other funds with brand new ACHN positions are Ori Hershkovitz's Nexthera Capital, Michael S. WeissáandáLindsay A. Rosenwald's Opus Point Partners Management, and James A. Silverman's Opaleye Management.
Let's check out hedge fund activity in other stocks - not necessarily in the same industry as Achillion Pharmaceuticals, Inc. (NASDAQ:ACHN) but similarly valued. We will take a look at Pennantpark Floating Rate Capital Ltd (NASDAQ:PFLT), Inovio Pharmaceuticals Inc (NASDAQ:INO), Enphase Energy Inc (NASDAQ:ENPH), and Replimune Group, Inc. (NASDAQ:REPL). All of these stocks' market caps are similar to ACHN's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position PFLT,5,12888,-2 INO,8,5802,0 ENPH,19,64630,1 REPL,9,79637,9 Average,10.25,40739,2 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 10.25 hedge funds with bullish positions and the average amount invested in these stocks was $41 million. That figure was $85 million in ACHN's case. Enphase Energy Inc (NASDAQ:ENPH) is the most popular stock in this table. On the other hand Pennantpark Floating Rate Capital Ltd (NASDAQ:PFLT) is the least popular one with only 5 bullish hedge fund positions. Compared to these stocks Achillion Pharmaceuticals, Inc. (NASDAQ:ACHN) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.
Disclosure: None. This article was originally published at Insider Monkey.