While the market driven by short-term sentiment influenced by the accomodative interest rate environment in the US, increasing oil prices and optimism towards the resolution of the trade war with China, many smart money investors kept their cautious approach regarding the current bull run in the first quarter and hedging or reducing many of their long positions. However, as we know, big investors usually buy stocks with strong fundamentals, which is why we believe we can profit from imitating them. In this article, we are going to take a look at the smart money sentiment surrounding Achillion Pharmaceuticals, Inc. (NASDAQ:ACHN).
Is Achillion Pharmaceuticals, Inc. (NASDAQ:ACHN) a buy, sell, or hold? The smart money is reducing their bets on the stock. The number of bullish hedge fund bets retreated by 4 lately. Our calculations also showed that ACHN 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 40 percentage points since May 2014 through May 30, 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 30.9% through May 30, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Let's take a glance at the latest hedge fund action surrounding Achillion Pharmaceuticals, Inc. (NASDAQ:ACHN).
What have hedge funds been doing with Achillion Pharmaceuticals, Inc. (NASDAQ:ACHN)?
At the end of the first quarter, a total of 14 of the hedge funds tracked by Insider Monkey were long this stock, a change of -22% from the fourth quarter of 2018. By comparison, 16 hedge funds held shares or bullish call options in ACHN a year ago. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, MAK Capital One held the most valuable stake in Achillion Pharmaceuticals, Inc. (NASDAQ:ACHN), which was worth $20.5 million at the end of the first quarter. On the second spot was Millennium Management which amassed $15.2 million worth of shares. Moreover, Citadel Investment Group, Rock Springs Capital Management, and Armistice Capital were also bullish on Achillion Pharmaceuticals, Inc. (NASDAQ:ACHN), allocating a large percentage of their portfolios to this stock.
Judging by the fact that Achillion Pharmaceuticals, Inc. (NASDAQ:ACHN) has witnessed falling interest from the aggregate hedge fund industry, it's easy to see that there is a sect of hedge funds that slashed their positions entirely last quarter. It's worth mentioning that Ari Zweiman's 683 Capital Partners dumped the largest position of the 700 funds followed by Insider Monkey, worth close to $1.6 million in call options, and Israel Englander's Millennium Management was right behind this move, as the fund sold off about $0.8 million worth. These transactions are important to note, as total hedge fund interest fell by 4 funds last quarter.
Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Achillion Pharmaceuticals, Inc. (NASDAQ:ACHN) but similarly valued. We will take a look at Haynes International, Inc. (NASDAQ:HAYN), Lydall, Inc. (NYSE:LDL), Park-Ohio Holdings Corp. (NASDAQ:PKOH), and On Deck Capital Inc (NYSE:ONDK). All of these stocks' market caps resemble ACHN's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position HAYN,8,49232,1 LDL,10,17129,1 PKOH,7,34747,1 ONDK,19,96233,-1 Average,11,49335,0.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 11 hedge funds with bullish positions and the average amount invested in these stocks was $49 million. That figure was $79 million in ACHN's case. On Deck Capital Inc (NYSE:ONDK) is the most popular stock in this table. On the other hand Park-Ohio Holdings Corp. (NASDAQ:PKOH) is the least popular one with only 7 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. 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 20 most popular stocks among hedge funds returned 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. Unfortunately ACHN wasn't nearly as popular as these 20 stocks and hedge funds that were betting on ACHN were disappointed as the stock returned 1% during the same 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 20 most popular stocks among hedge funds as 13 of these stocks already outperformed the market so far in Q2.
Disclosure: None. This article was originally published at Insider Monkey.