Last year's fourth quarter was a rough one for investors and many hedge funds, which were naturally unable to overcome the big dip in the broad market, as the S&P 500 fell by about 4.8% during 2018 and average hedge fund losing about 1%. The Russell 2000, composed of smaller companies, performed even worse, trailing the S&P by more than 6 percentage points, as investors fled less-known quantities for safe havens. Luckily hedge funds were shifting their holdings into large-cap stocks. The 20 most popular hedge fund stocks actually generated an average return of 37.4% in 2019 (through the end of November) and outperformed the S&P 500 ETF by 9.9 percentage points. We are done processing the latest 13F filings and in this article we will study how hedge fund sentiment towards Aldeyra Therapeutics Inc (NASDAQ:ALDX) changed during the first quarter.
Aldeyra Therapeutics Inc (NASDAQ:ALDX) investors should pay attention to a decrease in hedge fund sentiment of late. ALDX was in 12 hedge funds' portfolios at the end of the third quarter of 2019. There were 16 hedge funds in our database with ALDX holdings at the end of the previous quarter. Our calculations also showed that ALDX isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
At the moment there are plenty of formulas stock traders have at their disposal to appraise their stock investments. Two of the most underrated formulas are hedge fund and insider trading sentiment. Our experts have shown that, historically, those who follow the best picks of the elite investment managers can outperform the market by a healthy margin (see the details here).
[caption id="attachment_340081" align="aligncenter" width="450"] Phill Gross of Adage Capital Management[/caption]
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world's largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, "I'm investing more today than I did back in early 2009." So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds' buy/sell signals. We're going to take a glance at the key hedge fund action surrounding Aldeyra Therapeutics Inc (NASDAQ:ALDX).
Hedge fund activity in Aldeyra Therapeutics Inc (NASDAQ:ALDX)
At Q3's end, a total of 12 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -25% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards ALDX over the last 17 quarters. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Aldeyra Therapeutics Inc (NASDAQ:ALDX) was held by Perceptive Advisors, which reported holding $16.3 million worth of stock at the end of September. It was followed by 683 Capital Partners with a $12.4 million position. Other investors bullish on the company included Adage Capital Management, Prosight Capital, and Millennium Management. In terms of the portfolio weights assigned to each position Knoll Capital Management allocated the biggest weight to Aldeyra Therapeutics Inc (NASDAQ:ALDX), around 2.56% of its 13F portfolio. Prosight Capital is also relatively very bullish on the stock, setting aside 2.31 percent of its 13F equity portfolio to ALDX.
Due to the fact that Aldeyra Therapeutics Inc (NASDAQ:ALDX) has witnessed falling interest from the aggregate hedge fund industry, we can see that there lies a certain "tier" of funds who sold off their positions entirely last quarter. Intriguingly, Steve Cohen's Point72 Asset Management sold off the largest stake of all the hedgies followed by Insider Monkey, totaling an estimated $2 million in stock, and Renaissance Technologies was right behind this move, as the fund cut about $0.5 million worth. These moves are interesting, as aggregate hedge fund interest dropped by 4 funds last quarter.
Let's now review hedge fund activity in other stocks similar to Aldeyra Therapeutics Inc (NASDAQ:ALDX). These stocks are First Community Corporation (NASDAQ:FCCO), Alithya Group inc. (NASDAQ:ALYA), Aspen Aerogels Inc (NYSE:ASPN), and Chimerix Inc (NASDAQ:CMRX). This group of stocks' market caps are closest to ALDX's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position FCCO,3,8389,-1 ALYA,5,15097,-1 ASPN,6,17246,2 CMRX,11,25753,0 Average,6.25,16621,0 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 6.25 hedge funds with bullish positions and the average amount invested in these stocks was $17 million. That figure was $47 million in ALDX's case. Chimerix Inc (NASDAQ:CMRX) is the most popular stock in this table. On the other hand First Community Corporation (NASDAQ:FCCO) is the least popular one with only 3 bullish hedge fund positions. Compared to these stocks Aldeyra Therapeutics Inc (NASDAQ:ALDX) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Hedge funds were also right about betting on ALDX as the stock returned 51.4% during the first two months of Q4 and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
Disclosure: None. This article was originally published at Insider Monkey.