"Since 2006, value stocks (IVE vs IVW) have underperformed 11 of the 13 calendar years and when they beat growth, it wasn't by much. Cumulatively, through this week, it has been a 122% differential (up 52% for value vs up 174% for growth). This appears to be the longest and most severe drought for value investors since data collection began. It will go our way eventually as there are too many people paying far too much for today's darlings, both public and private. Further, the ten-year yield of 2.5% (pre-tax) isn't attractive nor is real estate. We believe the value part of the global equity market is the only place to earn solid risk adjusted returns and we believe those returns will be higher than normal," said Vilas Fund in its Q1 investor letter. We aren't sure whether value stocks outperform growth, but we follow hedge fund investor letters to understand where the markets and stocks might be going. This article will lay out and discuss the hedge fund and institutional investor sentiment towards LogicBio Therapeutics, Inc. (NASDAQ:LOGC).
Hedge fund interest in LogicBio Therapeutics, Inc. (NASDAQ:LOGC) 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 Pure Cycle Corporation (NASDAQ:PCYO), eGain Communications Corporation (NASDAQ:EGAN), and FTS International, Inc. (NYSE:FTSI) to gather more data points. Our calculations also showed that LOGC 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.
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 Russell 2000 ETFs by 40 percentage points since May 2014 (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 27.8% through November 21, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
[caption id="attachment_341400" align="alignnone" width="600"] Samuel Isaly of OrbiMed Advisors[/caption]
We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. 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 even check out this option genius' weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager's investor letter and the stock already gained 20 percent. Keeping this in mind let's analyze the new hedge fund action surrounding LogicBio Therapeutics, Inc. (NASDAQ:LOGC).
Hedge fund activity in LogicBio Therapeutics, Inc. (NASDAQ:LOGC)
At the end of the third quarter, a total of 6 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the second quarter of 2019. The graph below displays the number of hedge funds with bullish position in LOGC over the last 17 quarters. 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, OrbiMed Advisors held the most valuable stake in LogicBio Therapeutics, Inc. (NASDAQ:LOGC), which was worth $69.9 million at the end of the third quarter. On the second spot was Adage Capital Management which amassed $14.9 million worth of shares. Redmile Group, Samlyn Capital, and Lion Point 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 OrbiMed Advisors allocated the biggest weight to LogicBio Therapeutics, Inc. (NASDAQ:LOGC), around 1.33% of its 13F portfolio. Lion Point is also relatively very bullish on the stock, designating 0.6 percent of its 13F equity portfolio to LOGC.
Earlier we told you that the aggregate hedge fund interest in the stock was unchanged and we view this as a negative development. Even though there weren't any hedge funds dumping their holdings during the third quarter, there weren't any hedge funds initiating brand new positions. This indicates that hedge funds, at the very best, perceive this stock as dead money and they haven't identified any viable catalysts that can attract investor attention.
Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as LogicBio Therapeutics, Inc. (NASDAQ:LOGC) but similarly valued. These stocks are Pure Cycle Corporation (NASDAQ:PCYO), eGain Communications Corporation (NASDAQ:EGAN), FTS International, Inc. (NYSE:FTSI), and Accuray Incorporated (NASDAQ:ARAY). This group of stocks' market valuations are closest to LOGC's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position PCYO,7,84737,0 EGAN,10,28062,-2 FTSI,14,8141,-4 ARAY,18,49199,1 Average,12.25,42535,-1.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 12.25 hedge funds with bullish positions and the average amount invested in these stocks was $43 million. That figure was $107 million in LOGC's case. Accuray Incorporated (NASDAQ:ARAY) is the most popular stock in this table. On the other hand Pure Cycle Corporation (NASDAQ:PCYO) is the least popular one with only 7 bullish hedge fund positions. Compared to these stocks LogicBio Therapeutics, Inc. (NASDAQ:LOGC) is even less popular than PCYO. Hedge funds dodged a bullet by taking a bearish stance towards LOGC. Our calculations showed that the top 20 most popular hedge fund stocks returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately LOGC wasn't nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); LOGC investors were disappointed as the stock returned -25.6% during the fourth quarter (through the end of November) 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 so far in Q4.
Disclosure: None. This article was originally published at Insider Monkey.