Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that's why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to smartest analysts and expensive data/information sources that individual investors can't match. So should one consider investing in Acceleron Pharma Inc (NASDAQ:XLRN)? The smart money sentiment can provide an answer to this question.
Is XLRN a good stock to buy? Money managers were getting less optimistic. The number of long hedge fund bets went down by 14 in recent months. Acceleron Pharma Inc (NASDAQ:XLRN) was in 34 hedge funds' portfolios at the end of September. The all time high for this statistic is 48. Our calculations also showed that XLRN isn't among the 30 most popular stocks among hedge funds (click for Q3 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.
If you'd ask most investors, hedge funds are perceived as slow, old investment vehicles of yesteryear. While there are greater than 8000 funds trading at the moment, Our experts choose to focus on the aristocrats of this group, approximately 850 funds. It is estimated that this group of investors control bulk of all hedge funds' total asset base, and by tracking their first-class investments, Insider Monkey has unsheathed a number of investment strategies that have historically outperformed the S&P 500 index. Insider Monkey's flagship short hedge fund strategy beat the S&P 500 short ETFs by around 20 percentage points a year since its inception in March 2017. Our portfolio of short stocks lost 13% since February 2017 (through November 17th) even though the market was up 65% during the same period. We just shared a list of 6 short targets in our latest quarterly update .
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Do Hedge Funds Think XLRN Is A Good Stock To Buy Now?
Heading into the fourth quarter of 2020, a total of 34 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -29% from the previous quarter. On the other hand, there were a total of 26 hedge funds with a bullish position in XLRN a year ago. With the smart money's positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).
According to Insider Monkey's hedge fund database, Farallon Capital, holds the biggest position in Acceleron Pharma Inc (NASDAQ:XLRN). Farallon Capital has a $292.6 million position in the stock, comprising 2.1% of its 13F portfolio. The second most bullish fund manager is Alkeon Capital Management, managed by Panayotis Takis Sparaggis, which holds a $182.9 million position; the fund has 0.3% of its 13F portfolio invested in the stock. Other hedge funds and institutional investors with similar optimism consist of Behzad Aghazadeh's Avoro Capital Advisors (venBio Select Advisor), Brandon Haley's Holocene Advisors and Samuel Isaly's OrbiMed Advisors. In terms of the portfolio weights assigned to each position Foresite Capital allocated the biggest weight to Acceleron Pharma Inc (NASDAQ:XLRN), around 9.1% of its 13F portfolio. Kingdon Capital is also relatively very bullish on the stock, earmarking 3.09 percent of its 13F equity portfolio to XLRN.
Because Acceleron Pharma Inc (NASDAQ:XLRN) has faced bearish sentiment from the entirety of the hedge funds we track, it's easy to see that there exists a select few hedgies who sold off their positions entirely by the end of the third quarter. Interestingly, Steve Cohen's Point72 Asset Management dumped the largest position of the "upper crust" of funds followed by Insider Monkey, totaling an estimated $6 million in stock. Jeffrey Jay and David Kroin's fund, Great Point Partners, also dropped its stock, about $5.5 million worth. These moves are interesting, as aggregate hedge fund interest was cut by 14 funds by the end of the third quarter.
Let's also examine hedge fund activity in other stocks similar to Acceleron Pharma Inc (NASDAQ:XLRN). We will take a look at Dunkin Brands Group Inc (NASDAQ:DNKN), LHC Group, Inc. (NASDAQ:LHCG), AECOM (NYSE:ACM), Aramark (NYSE:ARMK), HD Supply Holdings Inc (NASDAQ:HDS), Carlisle Companies, Inc. (NYSE:CSL), and GrubHub Inc (NYSE:GRUB). This group of stocks' market caps match XLRN's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position DNKN,26,246077,-9 LHCG,17,78396,-13 ACM,39,785085,1 ARMK,40,881207,6 HDS,41,1195088,-3 CSL,28,191780,-10 GRUB,49,1607648,-3 Average,34.3,712183,-4.4 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 34.3 hedge funds with bullish positions and the average amount invested in these stocks was $712 million. That figure was $1111 million in XLRN's case. GrubHub Inc (NYSE:GRUB) is the most popular stock in this table. On the other hand LHC Group, Inc. (NASDAQ:LHCG) is the least popular one with only 17 bullish hedge fund positions. Acceleron Pharma Inc (NASDAQ:XLRN) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for XLRN is 38.8. 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. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 33.3% in 2020 through December 18th and still beat the market by 16.4 percentage points. A small number of hedge funds were also right about betting on XLRN as the stock returned 19.9% since the end of the third quarter (through 12/18) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.