We are still in an overall bull market and many stocks that smart money investors were piling into surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Hedge funds' top 3 stock picks returned 41.7% this year and beat the S&P 500 ETFs by 14 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That's why we believe it isn't a waste of time to check out hedge fund sentiment before you invest in a stock like Ascendis Pharma A/S (NASDAQ:ASND).
Hedge fund interest in Ascendis Pharma A/S (NASDAQ:ASND) shares was flat at the end of last quarter. This is usually a negative indicator. The level and the change in hedge fund popularity aren't the only variables you need to analyze to decipher hedge funds' perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That's why at the end of this article we will examine companies such as Intercorp Financial Services Inc. (NYSE:IFS), YY Inc (NASDAQ:YY), and First Financial Bankshares Inc (NASDAQ:FFIN) to gather more data points. Our calculations also showed that ASND 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.
In the eyes of most traders, hedge funds are perceived as unimportant, old investment tools of yesteryear. While there are more than 8000 funds in operation at the moment, Our experts look at the crème de la crème of this club, about 750 funds. Most estimates calculate that this group of people preside over the majority of the hedge fund industry's total capital, and by watching their unrivaled picks, Insider Monkey has determined a number of investment strategies that have historically defeated the S&P 500 index. Insider Monkey's flagship short hedge fund strategy defeated the S&P 500 short ETFs by around 20 percentage points per annum since its inception in May 2014. Our portfolio of short stocks lost 27.8% since February 2017 (through November 21st) even though the market was up more than 39% during the same period. We just shared a list of 7 short targets in our latest quarterly update .
[caption id="attachment_261250" align="aligncenter" width="600"] Peter Kolchinsky of RA Capital Management[/caption]
Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world's most bearish hedge fund that's more convinced than ever that a crash is coming, our long-short investment strategy doesn't rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds' buy/sell signals. Let's take a look at the new hedge fund action regarding Ascendis Pharma A/S (NASDAQ:ASND).
Hedge fund activity in Ascendis Pharma A/S (NASDAQ:ASND)
At the end of the third quarter, a total of 33 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from one quarter earlier. By comparison, 27 hedge funds held shares or bullish call options in ASND a year ago. With hedgies' positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were increasing their holdings significantly (or already accumulated large positions).
Among these funds, RA Capital Management held the most valuable stake in Ascendis Pharma A/S (NASDAQ:ASND), which was worth $398 million at the end of the third quarter. On the second spot was OrbiMed Advisors which amassed $358.2 million worth of shares. Baker Bros. Advisors, Vivo Capital, and venBio Select Advisor were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position RA Capital Management allocated the biggest weight to Ascendis Pharma A/S (NASDAQ:ASND), around 23.72% of its portfolio. Vivo Capital is also relatively very bullish on the stock, designating 22.58 percent of its 13F equity portfolio to ASND.
Because Ascendis Pharma A/S (NASDAQ:ASND) has experienced a decline in interest from the smart money, we can see that there is a sect of hedgies that decided to sell off their entire stakes last quarter. At the top of the heap, Joseph Edelman's Perceptive Advisors said goodbye to the largest investment of all the hedgies watched by Insider Monkey, totaling about $54.5 million in stock. Ori Hershkovitz's fund, Nexthera Capital, also sold off its stock, about $6.9 million worth. These transactions are important to note, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let's now take a look at hedge fund activity in other stocks similar to Ascendis Pharma A/S (NASDAQ:ASND). We will take a look at Intercorp Financial Services Inc. (NYSE:IFS), YY Inc (NASDAQ:YY), First Financial Bankshares Inc (NASDAQ:FFIN), and Cinemark Holdings, Inc. (NYSE:CNK). This group of stocks' market valuations match ASND's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position IFS,3,9694,3 YY,17,192246,-5 FFIN,16,25822,4 CNK,19,232969,-3 Average,13.75,115183,-0.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 13.75 hedge funds with bullish positions and the average amount invested in these stocks was $115 million. That figure was $2023 million in ASND's case. Cinemark Holdings, Inc. (NYSE:CNK) is the most popular stock in this table. On the other hand Intercorp Financial Services Inc. (NYSE:IFS) is the least popular one with only 3 bullish hedge fund positions. Compared to these stocks Ascendis Pharma A/S (NASDAQ:ASND) 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 ASND as the stock returned 19.6% 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.