The elite funds run by legendary investors such as David Tepper and Dan Loeb make hundreds of millions of dollars for themselves and their investors by spending enormous resources doing research on small cap stocks that big investment banks don't follow. Because of their pay structures, they have strong incentives to do the research necessary to beat the market. That's why we pay close attention to what they think in small cap stocks. In this article, we take a closer look at ChemoCentryx Inc (NASDAQ:CCXI) from the perspective of those elite funds.
Hedge fund interest in ChemoCentryx Inc (NASDAQ:CCXI) shares was flat at the end of last quarter. This is usually a negative indicator. The level and the change in hedge fund popularity aren't the only variables you need to analyze to decipher hedge funds' perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That's why at the end of this article we will examine companies such as Ingles Markets, Incorporated (NASDAQ:IMKTA), Sapiens International Corporation N.V. (NASDAQ:SPNS), and ObsEva SA (NASDAQ:OBSV) to gather more data points.
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 market by 32 percentage points since May 2014 through March 12, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.
We're going to go over the latest hedge fund action encompassing ChemoCentryx Inc (NASDAQ:CCXI).
How are hedge funds trading ChemoCentryx Inc (NASDAQ:CCXI)?
Heading into the first quarter of 2019, a total of 18 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from one quarter earlier. On the other hand, there were a total of 13 hedge funds with a bullish position in CCXI a year ago. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Biotechnology Value Fund / BVF Inc, managed by Mark Lampert, holds the most valuable position in ChemoCentryx Inc (NASDAQ:CCXI). Biotechnology Value Fund / BVF Inc has a $73 million position in the stock, comprising 9.5% of its 13F portfolio. Coming in second is Farallon Capital, managed by Thomas Steyer, which holds a $15.8 million position; 0.1% of its 13F portfolio is allocated to the company. Other members of the smart money that are bullish comprise Jim Simons's Renaissance Technologies, Wilmot B. Harkey and Daniel Mack's Nantahala Capital Management and Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital.
Due to the fact that ChemoCentryx Inc (NASDAQ:CCXI) has experienced a decline in interest from the smart money, logic holds that there was a specific group of funds who sold off their positions entirely in the third quarter. Intriguingly, Jeffrey Talpins's Element Capital Management cut the largest position of the 700 funds tracked by Insider Monkey, comprising an estimated $0.4 million in stock, and Noam Gottesman's GLG Partners was right behind this move, as the fund cut about $0.3 million worth. These transactions are important to note, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let's check out hedge fund activity in other stocks similar to ChemoCentryx Inc (NASDAQ:CCXI). We will take a look at Ingles Markets, Incorporated (NASDAQ:IMKTA), Sapiens International Corporation N.V. (NASDAQ:SPNS), ObsEva SA (NASDAQ:OBSV), and Modine Manufacturing Company (NYSE:MOD). This group of stocks' market caps match CCXI's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position IMKTA,10,44470,0 SPNS,3,5284,0 OBSV,11,79499,-2 MOD,17,59798,-1 Average,10.25,47263,-0.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 10.25 hedge funds with bullish positions and the average amount invested in these stocks was $47 million. That figure was $119 million in CCXI's case. Modine Manufacturing Company (NYSE:MOD) is the most popular stock in this table. On the other hand Sapiens International Corporation N.V. (NASDAQ:SPNS) is the least popular one with only 3 bullish hedge fund positions. Compared to these stocks ChemoCentryx Inc (NASDAQ:CCXI) is more popular among hedge funds. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Unfortunately CCXI wasn't nearly as popular as these 15 stock and hedge funds that were betting on CCXI were disappointed as the stock returned 13.5% and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 15 most popular stocks) among hedge funds as 13 of these stocks already outperformed the market this year.
Disclosure: None. This article was originally published at Insider Monkey.