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The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 821 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds' and investors' portfolio positions as of March 31st, a week after the market trough. In this article we look at what those investors think of FibroGen Inc (NASDAQ:FGEN).
Is FibroGen Inc (NASDAQ:FGEN) a buy right now? Hedge funds are becoming more confident. The number of long hedge fund positions increased by 1 recently. Our calculations also showed that FGEN isn't among the 30 most popular stocks among hedge funds (click for Q1 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.
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 58 percentage points since March 2017 (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 stocks that are in our short portfolio.
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Lei Zhang of Hillhouse Capital Management[/caption]
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out trades like this one. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind we're going to take a gander at the recent hedge fund action surrounding FibroGen Inc (NASDAQ:FGEN).
Hedge fund activity in FibroGen Inc (NASDAQ:FGEN)
At Q1's end, a total of 22 of the hedge funds tracked by Insider Monkey were long this stock, a change of 5% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards FGEN over the last 18 quarters. With hedge funds' positions undergoing their usual ebb and flow, there exists an "upper tier" of key hedge fund managers who were boosting their stakes meaningfully (or already accumulated large positions).
The largest stake in FibroGen Inc (NASDAQ:FGEN) was held by Hillhouse Capital Management, which reported holding $137.5 million worth of stock at the end of September. It was followed by Farallon Capital with a $55.6 million position. Other investors bullish on the company included EcoR1 Capital, Sectoral Asset Management, and Rock Springs Capital Management. In terms of the portfolio weights assigned to each position EcoR1 Capital allocated the biggest weight to FibroGen Inc (NASDAQ:FGEN), around 3.2% of its 13F portfolio. Sectoral Asset Management is also relatively very bullish on the stock, setting aside 2.24 percent of its 13F equity portfolio to FGEN.
With a general bullishness amongst the heavyweights, specific money managers have jumped into FibroGen Inc (NASDAQ:FGEN) headfirst. Rhenman & Partners Asset Management, managed by Henrik Rhenman, initiated the most outsized position in FibroGen Inc (NASDAQ:FGEN). Rhenman & Partners Asset Management had $8.7 million invested in the company at the end of the quarter. Phill Gross and Robert Atchinson's Adage Capital Management also initiated a $1.7 million position during the quarter. The following funds were also among the new FGEN investors: Jim Tananbaum's Foresite Capital, Peter Muller's PDT Partners, and Sander Gerber's Hudson Bay Capital Management.
Let's check out hedge fund activity in other stocks - not necessarily in the same industry as FibroGen Inc (NASDAQ:FGEN) but similarly valued. We will take a look at Unum Group (NYSE:UNM), Rayonier Inc. (NYSE:RYN), Community Bank System, Inc. (NYSE:CBU), and MSC Industrial Direct Co Inc (NYSE:MSM). This group of stocks' market values match FGEN's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position UNM,25,159751,-5 RYN,13,271594,-1 CBU,11,12275,1 MSM,23,240052,-7 Average,18,170918,-3 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 18 hedge funds with bullish positions and the average amount invested in these stocks was $171 million. That figure was $283 million in FGEN's case. Unum Group (NYSE:UNM) is the most popular stock in this table. On the other hand Community Bank System, Inc. (NYSE:CBU) is the least popular one with only 11 bullish hedge fund positions. FibroGen Inc (NASDAQ:FGEN) 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. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 13.9% in 2020 through June 10th but beat the market by 14.2 percentage points. Unfortunately FGEN wasn't nearly as popular as these 10 stocks and hedge funds that were betting on FGEN were disappointed as the stock returned 7.2% 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 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.