The fourth quarter was a rough one for most investors, as fears of a rising interest rate environment in the U.S, a trade war with China, and a more or less stagnant Europe, weighed heavily on the minds of investors. Both the S&P 500 and Russell 2000 sank as a result, with the Russell 2000, which is composed of smaller companies, being hit especially hard. This was primarily due to hedge funds, which are big supporters of small-cap stocks, pulling some of their capital out of the volatile markets during this time. Let's look at how this market volatility affected the sentiment of hedge funds towards Acceleron Pharma Inc (NASDAQ:XLRN), and what that likely means for the prospects of the company and its stock.
Acceleron Pharma Inc (NASDAQ:XLRN) investors should be aware of a decrease in hedge fund sentiment in recent months. Our calculations also showed that XLRN 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 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'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.5% through March 12, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
We're going to take a glance at the latest hedge fund action regarding Acceleron Pharma Inc (NASDAQ:XLRN).
What does the smart money think about Acceleron Pharma Inc (NASDAQ:XLRN)?
Heading into the first quarter of 2019, a total of 19 of the hedge funds tracked by Insider Monkey were long this stock, a change of -30% from the previous quarter. By comparison, 22 hedge funds held shares or bullish call options in XLRN a year ago. With hedge funds' capital changing hands, there exists a select group of noteworthy hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).
According to Insider Monkey's hedge fund database, Thomas Steyer's Farallon Capital has the largest position in Acceleron Pharma Inc (NASDAQ:XLRN), worth close to $91.5 million, comprising 0.8% of its total 13F portfolio. The second largest stake is held by James E. Flynn of Deerfield Management, with a $60.4 million position; 2.4% of its 13F portfolio is allocated to the stock. Remaining professional money managers that hold long positions include Jeffrey Jay and David Kroin's Great Point Partners, Joseph Edelman's Perceptive Advisors and Steve Cohen's Point72 Asset Management.
Because Acceleron Pharma Inc (NASDAQ:XLRN) has witnessed a decline in interest from hedge fund managers, logic holds that there lies a certain "tier" of funds that elected to cut their full holdings heading into Q3. It's worth mentioning that Lei Zhang's Hillhouse Capital Management cut the largest position of all the hedgies tracked by Insider Monkey, comprising an estimated $46.6 million in stock, and Gavin Saitowitz and Cisco J. del Valle's Springbok Capital was right behind this move, as the fund cut about $1.3 million worth. These transactions are interesting, as aggregate hedge fund interest fell by 8 funds heading into Q3.
Let's check out hedge fund activity in other stocks similar to Acceleron Pharma Inc (NASDAQ:XLRN). We will take a look at Brookfield Business Partners L.P. (NYSE:BBU), Albany International Corp. (NYSE:AIN), PQ Group Holdings Inc. (NYSE:PQG), and Franklin Electric Co., Inc. (NASDAQ:FELE). This group of stocks' market valuations are similar to XLRN's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position BBU,4,15907,-2 AIN,11,63419,-2 PQG,4,64147,-5 FELE,9,200565,-1 Average,7,86010,-2.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 7 hedge funds with bullish positions and the average amount invested in these stocks was $86 million. That figure was $332 million in XLRN's case. Albany International Corp. (NYSE:AIN) is the most popular stock in this table. On the other hand Brookfield Business Partners L.P. (NYSE:BBU) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks Acceleron Pharma Inc (NASDAQ:XLRN) 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 XLRN wasn't nearly as popular as these 15 stock and hedge funds that were betting on XLRN were disappointed as the stock returned -8% 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.