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 Concert Pharmaceuticals Inc (NASDAQ:CNCE).
Concert Pharmaceuticals Inc (NASDAQ:CNCE) has experienced a decrease in enthusiasm from smart money lately. CNCE was in 15 hedge funds' portfolios at the end of September. There were 16 hedge funds in our database with CNCE positions at the end of the previous quarter. Our calculations also showed that cnce 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.
[caption id="attachment_30621" align="aligncenter" width="487"] Cliff Asness of AQR Capital Management[/caption]
Let's take a peek at the latest hedge fund action surrounding Concert Pharmaceuticals Inc (NASDAQ:CNCE).
How are hedge funds trading Concert Pharmaceuticals Inc (NASDAQ:CNCE)?
Heading into the fourth quarter of 2018, a total of 15 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -6% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards CNCE over the last 13 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.
More specifically, Biotechnology Value Fund / BVF Inc was the largest shareholder of Concert Pharmaceuticals Inc (NASDAQ:CNCE), with a stake worth $23.6 million reported as of the end of September. Trailing Biotechnology Value Fund / BVF Inc was Renaissance Technologies, which amassed a stake valued at $10.8 million. Millennium Management, AQR Capital Management, and GLG Partners were also very fond of the stock, giving the stock large weights in their portfolios.
Seeing as Concert Pharmaceuticals Inc (NASDAQ:CNCE) has experienced declining sentiment from the smart money, logic holds that there was a specific group of hedgies who sold off their positions entirely last quarter. At the top of the heap, Peter Muller's PDT Partners dumped the largest position of the "upper crust" of funds watched by Insider Monkey, worth about $0.3 million in stock, and Ken Fisher's Fisher Asset Management was right behind this move, as the fund dumped about $0.3 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest fell by 1 funds last quarter.
Let's now review hedge fund activity in other stocks similar to Concert Pharmaceuticals Inc (NASDAQ:CNCE). We will take a look at Elevate Credit, Inc. (NYSE:ELVT), Exantas Capital Corp. (NYSE:XAN), Mesabi Trust (NYSE:MSB), and Selecta Biosciences, Inc. (NASDAQ:SELB). This group of stocks' market valuations are similar to CNCE's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ELVT,7,33815,-2 XAN,15,45485,3 MSB,8,24634,1 SELB,8,35612,2 Average,9.5,34887,1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 9.5 hedge funds with bullish positions and the average amount invested in these stocks was $35 million. That figure was $61 million in CNCE's case. Exantas Capital Corp. (NYSE:XAN) is the most popular stock in this table. On the other hand Elevate Credit, Inc. (NYSE:ELVT) is the least popular one with only 7 bullish hedge fund positions. Concert Pharmaceuticals Inc (NASDAQ:CNCE) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we'd rather spend our time researching stocks that hedge funds are piling on. In this regard XAN might be a better candidate to consider a long position.
Disclosure: None. This article was originally published at Insider Monkey.