Billionaire hedge fund managers such as David Abrams, Steve Cohen and Stan Druckenmiller can generate millions or even billions of dollars every year by pinning down high-potential small-cap stocks and pouring cash into these candidates. Small-cap stocks are overlooked by most investors, brokerage houses, and financial services hubs, while the nearly unlimited research abilities of the big players within the hedge fund industry can easily identify the undervalued and high-potential stocks that reside the ignored corners of equity markets. There are numerous small-cap stocks that have turned out to be great winners, which is one of the main reasons the Insider Monkey team pays close attention to the hedge fund activity in relation to these stocks.
Achillion Pharmaceuticals, Inc. (NASDAQ:ACHN) shares haven't seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 14 hedge funds' portfolios at the end of June. At the end of this article we will also compare ACHN to other stocks including Calyxt, Inc. (NASDAQ:CLXT), Assembly Biosciences Inc (NASDAQ:ASMB), and GenMark Diagnostics, Inc (NASDAQ:GNMK) to get a better sense of its popularity. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
In today’s marketplace there are a lot of formulas stock market investors can use to value publicly traded companies. Some of the most underrated formulas are hedge fund and insider trading activity. We have shown that, historically, those who follow the top picks of the elite money managers can beat the broader indices by a significant amount (see the details here).
Unlike other investors who track every movement of the 25 largest hedge funds, our long-short investment strategy relies on hedge fund buy/sell signals given by the 100 best performing hedge funds. Let's review the key hedge fund action surrounding Achillion Pharmaceuticals, Inc. (NASDAQ:ACHN).
Hedge fund activity in Achillion Pharmaceuticals, Inc. (NASDAQ:ACHN)
At the end of the second quarter, a total of 14 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards ACHN over the last 16 quarters. With the smart money's capital changing hands, there exists a few key hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).
The largest stake in Achillion Pharmaceuticals, Inc. (NASDAQ:ACHN) was held by MAK Capital One, which reported holding $18.6 million worth of stock at the end of March. It was followed by Millennium Management with a $11.6 million position. Other investors bullish on the company included Renaissance Technologies, Rock Springs Capital Management, and Citadel Investment Group.
Because Achillion Pharmaceuticals, Inc. (NASDAQ:ACHN) has witnessed a decline in interest from hedge fund managers, we can see that there were a few funds who were dropping their entire stakes by the end of the second quarter. Interestingly, Steven Boyd's Armistice Capital said goodbye to the largest position of all the hedgies monitored by Insider Monkey, worth an estimated $7.4 million in stock, and Andrew Feldstein and Stephen Siderow's Blue Mountain Capital was right behind this move, as the fund cut about $0.8 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let's check out hedge fund activity in other stocks - not necessarily in the same industry as Achillion Pharmaceuticals, Inc. (NASDAQ:ACHN) but similarly valued. These stocks are Calyxt, Inc. (NASDAQ:CLXT), Assembly Biosciences Inc (NASDAQ:ASMB), GenMark Diagnostics, Inc (NASDAQ:GNMK), and Metropolitan Bank Holding Corp. (NYSE:MCB). This group of stocks' market valuations resemble ACHN's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CLXT,3,5882,0 ASMB,18,82204,-1 GNMK,14,74719,0 MCB,6,62855,-2 Average,10.25,56415,-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 $56 million. That figure was $63 million in ACHN's case. Assembly Biosciences Inc (NASDAQ:ASMB) is the most popular stock in this table. On the other hand Calyxt, Inc. (NASDAQ:CLXT) is the least popular one with only 3 bullish hedge fund positions. Achillion Pharmaceuticals, Inc. (NASDAQ:ACHN) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Hedge funds were also right about betting on ACHN as the stock returned 34.3% during the third quarter and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.