At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (see why hell is coming). We reversed our stance on March 25th after seeing unprecedented fiscal and monetary stimulus unleashed by the Fed and the Congress. This is the perfect market for stock pickers, now that the stocks are fully valued again. In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards ChemoCentryx Inc (NASDAQ:CCXI) at the end of the second quarter and determine whether the smart money was really smart about this stock.
ChemoCentryx Inc (NASDAQ:CCXI) was in 31 hedge funds' portfolios at the end of June. The all time high for this statistics is 30. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. CCXI has experienced an increase in hedge fund sentiment in recent months. There were 30 hedge funds in our database with CCXI holdings at the end of March. Our calculations also showed that CCXI isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks). 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 56 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 34% through August 17th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Peter Kolchinsky of RA Capital Management
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, this “mom” trader turned $2000 into $2 million within 2 years. So, we are checking out her best trade idea of the month. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. 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. With all of this in mind we're going to analyze the recent hedge fund action surrounding ChemoCentryx Inc (NASDAQ:CCXI).
What does smart money think about ChemoCentryx Inc (NASDAQ:CCXI)?
At the end of the second quarter, a total of 31 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 3% from the previous quarter. On the other hand, there were a total of 17 hedge funds with a bullish position in CCXI a year ago. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in ChemoCentryx Inc (NASDAQ:CCXI) was held by RA Capital Management, which reported holding $277.7 million worth of stock at the end of September. It was followed by Consonance Capital Management with a $98.2 million position. Other investors bullish on the company included Cormorant Asset Management, Cormorant Asset Management, and Baker Bros. Advisors. In terms of the portfolio weights assigned to each position Consonance Capital Management allocated the biggest weight to ChemoCentryx Inc (NASDAQ:CCXI), around 5.88% of its 13F portfolio. RA Capital Management is also relatively very bullish on the stock, dishing out 5.41 percent of its 13F equity portfolio to CCXI.
As one would reasonably expect, some big names were breaking ground themselves. Berylson Capital Partners, managed by James Thomas Berylson, assembled the biggest position in ChemoCentryx Inc (NASDAQ:CCXI). Berylson Capital Partners had $3.8 million invested in the company at the end of the quarter. Michael Gelband's ExodusPoint Capital also initiated a $2.3 million position during the quarter. The other funds with new positions in the stock are Matthew L Pinz's Pinz Capital, Parvinder Thiara's Athanor Capital, and Karim Abbadi and Edward McBride's Centiva Capital.
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as ChemoCentryx Inc (NASDAQ:CCXI) but similarly valued. These stocks are Amicus Therapeutics, Inc. (NASDAQ:FOLD), Highwoods Properties Inc (NYSE:HIW), QTS Realty Trust Inc (NYSE:QTS), Telecom Argentina S.A. (NYSE:TEO), Performance Food Group Company (NYSE:PFGC), Hudson Pacific Properties Inc (NYSE:HPP), and The Hanover Insurance Group, Inc. (NYSE:THG). This group of stocks' market values are similar to CCXI's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position FOLD,32,1316185,4 HIW,30,142676,15 QTS,29,513230,8 TEO,3,33682,-1 PFGC,20,215689,-9 HPP,24,437178,5 THG,25,133465,1 Average,23.3,398872,3.3 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 23.3 hedge funds with bullish positions and the average amount invested in these stocks was $399 million. That figure was $702 million in CCXI's case. Amicus Therapeutics, Inc. (NASDAQ:FOLD) is the most popular stock in this table. On the other hand Telecom Argentina S.A. (NYSE:TEO) is the least popular one with only 3 bullish hedge fund positions. ChemoCentryx Inc (NASDAQ:CCXI) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for CCXI is 84.3. 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 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 gained 23.8% in 2020 through September 14th and beat the market by 17.6 percentage points. Unfortunately CCXI wasn't nearly as popular as these 10 stocks and hedge funds that were betting on CCXI were disappointed as the stock returned -8.6% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
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Disclosure: None. This article was originally published at Insider Monkey.