The financial regulations require hedge funds and wealthy investors that exceeded the $100 million equity holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn't the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds' positions on March 31st, about a week after the S&P 500 Index bottomed. We at Insider Monkey have made an extensive database of more than 821 of those established hedge funds and famous value investors' filings. In this article, we analyze how these elite funds and prominent investors traded Homology Medicines, Inc. (NASDAQ:FIXX) based on those filings.
Is Homology Medicines, Inc. (NASDAQ:FIXX) a buy here? The smart money is turning bullish. The number of long hedge fund bets rose by 6 recently. Our calculations also showed that FIXX isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks). FIXX was in 15 hedge funds' portfolios at the end of March. There were 9 hedge funds in our database with FIXX holdings at the end of the previous quarter. Video: Watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 58 percentage points since March 2017 (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 36% through May 18th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
[caption id="attachment_364894" align="aligncenter" width="392"] James E. Flynn of Deerfield Management[/caption]
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, blockchain technology's influence will go beyond online payments. So, we are checking out this futurist's moonshot opportunities in tech stocks. We interview hedge fund managers and ask them about their best ideas. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Now let's go over the latest hedge fund action encompassing Homology Medicines, Inc. (NASDAQ:FIXX).
What have hedge funds been doing with Homology Medicines, Inc. (NASDAQ:FIXX)?
Heading into the second quarter of 2020, a total of 15 of the hedge funds tracked by Insider Monkey were long this stock, a change of 67% from the previous quarter. By comparison, 7 hedge funds held shares or bullish call options in FIXX 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, Deerfield Management held the most valuable stake in Homology Medicines, Inc. (NASDAQ:FIXX), which was worth $62.7 million at the end of the third quarter. On the second spot was Vivo Capital which amassed $15.7 million worth of shares. Cormorant Asset Management, Rock Springs Capital Management, and Ghost Tree Capital 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 Deerfield Management allocated the biggest weight to Homology Medicines, Inc. (NASDAQ:FIXX), around 1.99% of its 13F portfolio. Vivo Capital is also relatively very bullish on the stock, dishing out 1.42 percent of its 13F equity portfolio to FIXX.
With a general bullishness amongst the heavyweights, specific money managers have been driving this bullishness. Cormorant Asset Management, managed by Bihua Chen, assembled the largest position in Homology Medicines, Inc. (NASDAQ:FIXX). Cormorant Asset Management had $9.3 million invested in the company at the end of the quarter. Ken Greenberg and David Kim's Ghost Tree Capital also initiated a $3.1 million position during the quarter. The other funds with new positions in the stock are Aaron Cowen's Suvretta Capital Management, Renaissance Technologies, and John Overdeck and David Siegel's Two Sigma Advisors.
Let's check out hedge fund activity in other stocks similar to Homology Medicines, Inc. (NASDAQ:FIXX). We will take a look at MFA Financial, Inc. (NYSE:MFA), Ovintiv Inc. (NYSE:OVV), Cytokinetics, Inc. (NASDAQ:CYTK), and International Seaways, Inc. (NYSE:INSW). This group of stocks' market valuations resemble FIXX's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position MFA,16,25866,-3 OVV,19,27099,-4 CYTK,22,206499,2 INSW,27,169817,5 Average,21,107320,0 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 21 hedge funds with bullish positions and the average amount invested in these stocks was $107 million. That figure was $102 million in FIXX's case. International Seaways, Inc. (NYSE:INSW) is the most popular stock in this table. On the other hand MFA Financial, Inc. (NYSE:MFA) is the least popular one with only 16 bullish hedge fund positions. Compared to these stocks Homology Medicines, Inc. (NASDAQ:FIXX) is even less popular than MFA. Hedge funds dodged a bullet by taking a bearish stance towards FIXX. Our calculations showed that the top 10 most popular hedge fund stocks returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 13.3% in 2020 through June 25th but managed to beat the market by 16.8 percentage points. Unfortunately FIXX wasn't nearly as popular as these 10 stocks (hedge fund sentiment was very bearish); FIXX investors were disappointed as the stock returned 4.9% during the second quarter (through June 25th) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market so far in 2020.
Disclosure: None. This article was originally published at Insider Monkey.