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Did Hedge Funds Make The Right Call On Abeona Therapeutics Inc (ABEO) ?

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Debasis Saha
·6 min read
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The latest 13F reporting period has come and gone, and Insider Monkey have plowed through 821 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds' and investors' portfolio positions as of March 31st, a week after the market trough. Now, we are almost done with the second quarter. Investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned almost 20% this quarter. In this article you are going to find out whether hedge funds thoughtAbeona Therapeutics Inc (NASDAQ:ABEO) was a good investment heading into the second quarter and how the stock traded in comparison to the top hedge fund picks.

Is Abeona Therapeutics Inc (NASDAQ:ABEO) going to take off soon? Prominent investors were turning less bullish. The number of long hedge fund positions shrunk by 3 recently. Our calculations also showed that ABEO isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks). ABEO was in 19 hedge funds' portfolios at the end of the first quarter of 2020. There were 22 hedge funds in our database with ABEO positions at the end of the previous quarter.

Video: Watch our video about the top 5 most popular hedge fund stocks.

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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 58 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'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

AQR CAPITAL MANAGEMENT
AQR CAPITAL MANAGEMENT

Cliff Asness of AQR Capital Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. Cannabis stocks are roaring back in 2020, so we are checking out this under-the-radar stock. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. 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. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. Keeping this in mind let's go over the new hedge fund action encompassing Abeona Therapeutics Inc (NASDAQ:ABEO).

Hedge fund activity in Abeona Therapeutics Inc (NASDAQ:ABEO)

At the end of the first quarter, a total of 19 of the hedge funds tracked by Insider Monkey were long this stock, a change of -14% from the previous quarter. On the other hand, there were a total of 15 hedge funds with a bullish position in ABEO a year ago. With hedgies' sentiment swirling, there exists a select group of notable hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).

Is ABEO A Good Stock To Buy?
Is ABEO A Good Stock To Buy?

The largest stake in Abeona Therapeutics Inc (NASDAQ:ABEO) was held by Great Point Partners, which reported holding $15.1 million worth of stock at the end of September. It was followed by Adage Capital Management with a $11.6 million position. Other investors bullish on the company included Knoll Capital Management, Point72 Asset Management, and Baker Bros. Advisors. In terms of the portfolio weights assigned to each position Knoll Capital Management allocated the biggest weight to Abeona Therapeutics Inc (NASDAQ:ABEO), around 5.64% of its 13F portfolio. Great Point Partners is also relatively very bullish on the stock, earmarking 1.58 percent of its 13F equity portfolio to ABEO.

Judging by the fact that Abeona Therapeutics Inc (NASDAQ:ABEO) has faced a decline in interest from the entirety of the hedge funds we track, we can see that there is a sect of funds that slashed their entire stakes last quarter. Intriguingly, Farallon Capital said goodbye to the largest position of the 750 funds followed by Insider Monkey, totaling an estimated $6.5 million in stock. Ryan Tolkin (CIO)'s fund, Schonfeld Strategic Advisors, also sold off its stock, about $4.8 million worth. These moves are interesting, as aggregate hedge fund interest dropped by 3 funds last quarter.

Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Abeona Therapeutics Inc (NASDAQ:ABEO) but similarly valued. We will take a look at Cooper-Standard Holdings Inc (NYSE:CPS), Lands' End, Inc. (NASDAQ:LE), NantHealth, Inc. (NASDAQ:NH), and Allegro Merger Corp. (NASDAQ:ALGR). This group of stocks' market values are closest to ABEO's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CPS,11,13018,-3 LE,8,27863,-2 NH,4,1315,0 ALGR,8,18706,-3 Average,7.75,15226,-2 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 7.75 hedge funds with bullish positions and the average amount invested in these stocks was $15 million. That figure was $55 million in ABEO's case. Cooper-Standard Holdings Inc (NYSE:CPS) is the most popular stock in this table. On the other hand NantHealth, Inc. (NASDAQ:NH) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks Abeona Therapeutics Inc (NASDAQ:ABEO) is more popular among hedge funds. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks returned 18.6% in 2020 through July 27th but still managed to beat the market by 17.1 percentage points. Hedge funds were also right about betting on ABEO as the stock returned 44.8% since Q1 and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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Disclosure: None. This article was originally published at Insider Monkey.

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