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Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed in recent years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets hoping that they will outperform the broader market. Our research shows that certain hedge funds do have great stock picking skills (and we can identify these hedge funds in advance pretty accurately), so let’s take a glance at the smart money sentiment towards Homology Medicines, Inc. (NASDAQ:FIXX).
Homology Medicines, Inc. (NASDAQ:FIXX) was in 12 hedge funds' portfolios at the end of September. FIXX has seen a decrease in hedge fund interest recently. There were 18 hedge funds in our database with FIXX holdings at the end of the previous quarter. Our calculations also showed that FIXX 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.
According to most shareholders, hedge funds are viewed as worthless, old investment vehicles of yesteryear. While there are more than 8000 funds in operation at present, We hone in on the aristocrats of this club, around 750 funds. It is estimated that this group of investors handle the lion's share of the hedge fund industry's total asset base, and by keeping an eye on their highest performing stock picks, Insider Monkey has revealed several investment strategies that have historically defeated the broader indices. Insider Monkey's flagship short hedge fund strategy outstripped 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 .
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James E. Flynn of Deerfield Management[/caption]
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world's largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, "I'm investing more today than I did back in early 2009." So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds' buy/sell signals. Let's view the new hedge fund action surrounding Homology Medicines, Inc. (NASDAQ:FIXX).
What have hedge funds been doing with Homology Medicines, Inc. (NASDAQ:FIXX)?
At Q3's end, a total of 12 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -33% from the previous quarter. The graph below displays the number of hedge funds with bullish position in FIXX over the last 17 quarters. With the smart money's capital changing hands, there exists a select group of key hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).
More specifically, Deerfield Management was the largest shareholder of Homology Medicines, Inc. (NASDAQ:FIXX), with a stake worth $104.3 million reported as of the end of September. Trailing Deerfield Management was Vivo Capital, which amassed a stake valued at $21.1 million. Casdin Capital, Citadel Investment Group, and Rock Springs Capital Management 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 4.25% of its 13F portfolio. Vivo Capital is also relatively very bullish on the stock, earmarking 2.4 percent of its 13F equity portfolio to FIXX.
Due to the fact that Homology Medicines, Inc. (NASDAQ:FIXX) has faced falling interest from hedge fund managers, it's easy to see that there exists a select few fund managers that slashed their entire stakes by the end of the third quarter. It's worth mentioning that Steve Cohen's Point72 Asset Management said goodbye to the biggest investment of all the hedgies watched by Insider Monkey, valued at about $4 million in stock, and Brian Ashford-Russell and Tim Woolley's Polar Capital was right behind this move, as the fund dumped about $2 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest dropped by 6 funds by the end of the third quarter.
Let's also examine hedge fund activity in other stocks similar to Homology Medicines, Inc. (NASDAQ:FIXX). These stocks are BJ's Restaurants, Inc. (NASDAQ:BJRI), Vivint Solar Inc (NYSE:VSLR), Carrizo Oil & Gas, Inc. (NASDAQ:CRZO), and Tivity Health, Inc. (NASDAQ:TVTY). This group of stocks' market caps match FIXX's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position BJRI,9,82659,-5 VSLR,11,55263,0 CRZO,16,142584,6 TVTY,19,233416,3 Average,13.75,128481,1 [/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 $128 million. That figure was $174 million in FIXX's case. Tivity Health, Inc. (NASDAQ:TVTY) is the most popular stock in this table. On the other hand BJ's Restaurants, Inc. (NASDAQ:BJRI) is the least popular one with only 9 bullish hedge fund positions. Homology Medicines, Inc. (NASDAQ:FIXX) 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 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately FIXX wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); FIXX investors were disappointed as the stock returned -11.6% during the first two months of the fourth quarter 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 70 percent of these stocks already outperformed the market in Q4.
Disclosure: None. This article was originally published at Insider Monkey.