Russell 2000 ETF (IWM) lagged the larger S&P 500 ETF (SPY) by nearly 9 percentage points since the end of the third quarter of 2018 as investors worried over the possible ramifications of rising interest rates and escalation of the trade war with China. The hedge funds and institutional investors we track typically invest more in smaller-cap stocks than an average investor (i.e. only 298 S&P 500 constituents were among the 500 most popular stocks among hedge funds), and we have seen data that shows those funds paring back their overall exposure. Those funds cutting positions in small-caps is one reason why volatility has increased. In the following paragraphs, we take a closer look at what hedge funds and prominent investors think of FibroGen Inc (NASDAQ:FGEN) and see how the stock is affected by the recent hedge fund activity.
Is FibroGen Inc (NASDAQ:FGEN) worth your attention right now? Money managers are betting on the stock. The number of long hedge fund bets increased by 1 in recent months. Our calculations also showed that fgen isn't among the 30 most popular stocks among hedge funds. FGEN was in 21 hedge funds' portfolios at the end of the first quarter of 2019. There were 20 hedge funds in our database with FGEN positions at the end of the previous quarter.
Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. 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 look at the latest hedge fund action regarding FibroGen Inc (NASDAQ:FGEN).
What have hedge funds been doing with FibroGen Inc (NASDAQ:FGEN)?
Heading into the second quarter of 2019, a total of 21 of the hedge funds tracked by Insider Monkey were long this stock, a change of 5% from the fourth quarter of 2018. Below, you can check out the change in hedge fund sentiment towards FGEN over the last 15 quarters. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in FibroGen Inc (NASDAQ:FGEN) was held by Adage Capital Management, which reported holding $57.1 million worth of stock at the end of March. It was followed by Farallon Capital with a $49.8 million position. Other investors bullish on the company included EcoR1 Capital, Rock Springs Capital Management, and GLG Partners.
Consequently, specific money managers have been driving this bullishness. Sectoral Asset Management, managed by Jerome Pfund and Michael Sjostrom, initiated the biggest position in FibroGen Inc (NASDAQ:FGEN). Sectoral Asset Management had $4.4 million invested in the company at the end of the quarter. David Costen Haley's HBK Investments also initiated a $2 million position during the quarter. The other funds with new positions in the stock are Hal Mintz's Sabby Capital, Ken Greenberg and David Kim's Ghost Tree Capital, and Joseph Edelman's Perceptive Advisors.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as FibroGen Inc (NASDAQ:FGEN) but similarly valued. These stocks are Portland General Electric Company (NYSE:POR), The Hanover Insurance Group, Inc. (NYSE:THG), AECOM (NYSE:ACM), and Healthequity Inc (NASDAQ:HQY). This group of stocks' market valuations are similar to FGEN's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position POR,19,251671,0 THG,23,300220,3 ACM,21,378709,3 HQY,22,134839,4 Average,21.25,266360,2.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 21.25 hedge funds with bullish positions and the average amount invested in these stocks was $266 million. That figure was $194 million in FGEN's case. The Hanover Insurance Group, Inc. (NYSE:THG) is the most popular stock in this table. On the other hand Portland General Electric Company (NYSE:POR) is the least popular one with only 19 bullish hedge fund positions. FibroGen Inc (NASDAQ:FGEN) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and 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 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Unfortunately FGEN wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); FGEN investors were disappointed as the stock returned -33.4% during the same time 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.