We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. We at Insider Monkey have gone over 835 13F filings that hedge funds and prominent investors are required to file by the SEC The 13F filings show the funds' and investors' portfolio positions as of December 31st. In this article, we look at what those funds think of Allogene Therapeutics, Inc. (NASDAQ:ALLO) based on that data.
Allogene Therapeutics, Inc. (NASDAQ:ALLO) has experienced an increase in enthusiasm from smart money in recent months. ALLO was in 12 hedge funds' portfolios at the end of December. There were 6 hedge funds in our database with ALLO positions at the end of the previous quarter. Our calculations also showed that ALLO isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
To most stock holders, hedge funds are perceived as slow, outdated investment vehicles of yesteryear. While there are over 8000 funds with their doors open at present, We choose to focus on the leaders of this group, about 850 funds. These investment experts control most of all hedge funds' total capital, and by keeping track of their inimitable equity investments, Insider Monkey has found several investment strategies that have historically outrun the market. Insider Monkey's flagship short hedge fund strategy beat the S&P 500 short ETFs by around 20 percentage points per year since its inception in March 2017. Our portfolio of short stocks lost 35.3% since February 2017 (through March 3rd) even though the market was up more than 35% during the same period. We just shared a list of 7 short targets in our latest quarterly update .
[caption id="attachment_365194" align="aligncenter" width="400"] David E. Shaw of D.E. Shaw[/caption]
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic's significance before most investors. With all of this in mind we're going to check out the recent hedge fund action encompassing Allogene Therapeutics, Inc. (NASDAQ:ALLO).
How are hedge funds trading Allogene Therapeutics, Inc. (NASDAQ:ALLO)?
Heading into the first quarter of 2020, a total of 12 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 100% from the third quarter of 2019. By comparison, 10 hedge funds held shares or bullish call options in ALLO a year ago. So, let's examine 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, Joseph Edelman's Perceptive Advisors has the number one position in Allogene Therapeutics, Inc. (NASDAQ:ALLO), worth close to $40.1 million, corresponding to 0.8% of its total 13F portfolio. Coming in second is Leonard A. Potter of Wildcat Capital Management, with a $31.2 million position; 9% of its 13F portfolio is allocated to the company. Some other peers with similar optimism include Behzad Aghazadeh's venBio Select Advisor, Paul Marshall and Ian Wace's Marshall Wace LLP and D. E. Shaw's D E Shaw. In terms of the portfolio weights assigned to each position Wildcat Capital Management allocated the biggest weight to Allogene Therapeutics, Inc. (NASDAQ:ALLO), around 9.01% of its 13F portfolio. venBio Select Advisor is also relatively very bullish on the stock, dishing out 0.86 percent of its 13F equity portfolio to ALLO.
As industrywide interest jumped, key money managers have jumped into Allogene Therapeutics, Inc. (NASDAQ:ALLO) headfirst. Marshall Wace LLP, managed by Paul Marshall and Ian Wace, initiated the most outsized position in Allogene Therapeutics, Inc. (NASDAQ:ALLO). Marshall Wace LLP had $4 million invested in the company at the end of the quarter. D. E. Shaw's D E Shaw also initiated a $3.2 million position during the quarter. The other funds with brand new ALLO positions are Israel Englander's Millennium Management, Noam Gottesman's GLG Partners, and David Harding's Winton Capital Management.
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Allogene Therapeutics, Inc. (NASDAQ:ALLO) but similarly valued. We will take a look at CONMED Corporation (NASDAQ:CNMD), Paramount Group Inc (NYSE:PGRE), EnerSys (NYSE:ENS), and Gol Linhas Aereas Inteligentes SA (NYSE:GOL). This group of stocks' market caps are closest to ALLO's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CNMD,31,270901,7 PGRE,20,362031,-2 ENS,13,71202,-6 GOL,12,218734,1 Average,19,230717,0 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 19 hedge funds with bullish positions and the average amount invested in these stocks was $231 million. That figure was $115 million in ALLO's case. CONMED Corporation (NASDAQ:CNMD) is the most popular stock in this table. On the other hand Gol Linhas Aereas Inteligentes SA (NYSE:GOL) is the least popular one with only 12 bullish hedge fund positions. Compared to these stocks Allogene Therapeutics, Inc. (NASDAQ:ALLO) is even less popular than GOL. Hedge funds dodged a bullet by taking a bearish stance towards ALLO. Our calculations showed that the top 20 most popular hedge fund stocks returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 17.4% in 2020 through March 25th but managed to beat the market by 5.5 percentage points. Unfortunately ALLO wasn't nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); ALLO investors were disappointed as the stock returned -23.7% 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 20 most popular stocks among hedge funds as most of these stocks already outperformed the market so far in Q1. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.