Hedge Funds Are Buying AEterna Zentaris Inc. (AEZS)
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 AEterna Zentaris Inc. (NASDAQ:AEZS).
AEterna Zentaris Inc. (NASDAQ:AEZS) investors should pay attention to an increase in activity from the world's largest hedge funds in recent months. AEterna Zentaris Inc. (NASDAQ:AEZS) was in 3 hedge funds' portfolios at the end of March. The all time high for this statistic is 5. Our calculations also showed that AEZS isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings).
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 more than 115 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.
Matthew Hulsizer of PEAK6 Capital
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, an activist hedge fund wants to buy this $26 biotech stock for $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 let's take a look at the recent hedge fund action regarding AEterna Zentaris Inc. (NASDAQ:AEZS).
Do Hedge Funds Think AEZS Is A Good Stock To Buy Now?
At Q1's end, a total of 3 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 200% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards AEZS over the last 23 quarters. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to Insider Monkey's hedge fund database, Sabby Capital, managed by Hal Mintz, holds the biggest position in AEterna Zentaris Inc. (NASDAQ:AEZS). Sabby Capital has a $0.7 million position in the stock, comprising 0.1% of its 13F portfolio. Coming in second is Millennium Management, led by Israel Englander, holding a $0.2 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Some other peers that are bullish encompass Matthew Hulsizer's PEAK6 Capital Management, and Hal Mintz's Sabby Capital. In terms of the portfolio weights assigned to each position Sabby Capital allocated the biggest weight to AEterna Zentaris Inc. (NASDAQ:AEZS), around 0.13% of its 13F portfolio. Sabby Capital is also relatively very bullish on the stock, designating 0.01 percent of its 13F equity portfolio to AEZS.
With a general bullishness amongst the heavyweights, specific money managers have been driving this bullishness. Sabby Capital, managed by Hal Mintz, created the biggest position in AEterna Zentaris Inc. (NASDAQ:AEZS). Sabby Capital had $0.7 million invested in the company at the end of the quarter. Israel Englander's Millennium Management also made a $0.2 million investment in the stock during the quarter. The following funds were also among the new AEZS investors: Matthew Hulsizer's PEAK6 Capital Management, Ken Griffin's Citadel Investment Group, and Hal Mintz's Sabby Capital.
Let's check out hedge fund activity in other stocks similar to AEterna Zentaris Inc. (NASDAQ:AEZS). We will take a look at Oblong Inc. (NASDAQ:OBLG), Nicholas Financial, Inc. (NASDAQ:NICK), CollPlant Biotechnologies Ltd. (NASDAQ:CLGN), Lipocine Inc (NASDAQ:LPCN), CF Bankshares Inc (NASDAQ:CFBK), Alpha Pro Tech, Ltd. (NYSE:APT), and Zovio Inc. (NASDAQ:ZVO). All of these stocks' market caps are similar to AEZS's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position OBLG,3,25393,2 NICK,2,27278,-1 CLGN,1,229,0 LPCN,2,102,0 CFBK,2,5345,1 APT,6,7440,-2 ZVO,9,27987,-2 Average,3.6,13396,-0.3 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 3.6 hedge funds with bullish positions and the average amount invested in these stocks was $13 million. That figure was $1 million in AEZS's case. Zovio Inc. (NASDAQ:ZVO) is the most popular stock in this table. On the other hand CollPlant Biotechnologies Ltd. (NASDAQ:CLGN) is the least popular one with only 1 bullish hedge fund positions. AEterna Zentaris Inc. (NASDAQ:AEZS) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for AEZS is 37.5. 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 negative signal and 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 17.2% in 2021 through June 11th and surpassed the market again by 3.3 percentage points. Unfortunately AEZS wasn't nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); AEZS investors were disappointed as the stock returned -7.9% since the end of March (through 6/11) 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 most of these stocks already outperformed the market in 2021.
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Disclosure: None. This article was originally published at Insider Monkey.
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