Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips or bumps on the charts usually don't make them change their opinion towards a company. This time it may be different. The coronavirus pandemic destroyed the high correlations among major industries and asset classes. We are now in a stock pickers market where fundamentals of a stock have more effect on the price than the overall direction of the market. As a result we observe sudden and large changes in hedge fund positions depending on the news flow. Let’s take a look at the hedge fund sentiment towards Viela Bio, Inc. (NASDAQ:VIE) to find out whether there were any major changes in hedge funds' views.
Is Viela Bio (NASDAQ:VIE) a good stock to buy now? VIE was in 5 hedge funds' portfolios at the end of September. The all time high for this statistics is 8. VIE investors should be aware of a decrease in enthusiasm from smart money lately. There were 8 hedge funds in our database with VIE positions at the end of the second quarter. Our calculations also showed that VIE isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's monthly stock picks returned 113% since March 2017 and outperformed the S&P 500 ETFs by more than 66 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Lei Zhang of Hillhouse Capital Management
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. With all of this in mind we're going to take a peek at the latest hedge fund action regarding Viela Bio, Inc. (NASDAQ:VIE).
How have hedgies been trading Viela Bio, Inc. (NASDAQ:VIE)?
Heading into the fourth quarter of 2020, a total of 5 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -38% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in VIE over the last 21 quarters. With hedge funds' sentiment swirling, there exists a select group of notable hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).
More specifically, Hillhouse Capital Management was the largest shareholder of Viela Bio, Inc. (NASDAQ:VIE), with a stake worth $69.6 million reported as of the end of September. Trailing Hillhouse Capital Management was Cormorant Asset Management, which amassed a stake valued at $44.5 million. Viking Global, Millennium Management, and Citadel Investment Group 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 Cormorant Asset Management allocated the biggest weight to Viela Bio, Inc. (NASDAQ:VIE), around 1.71% of its 13F portfolio. Hillhouse Capital Management is also relatively very bullish on the stock, designating 0.53 percent of its 13F equity portfolio to VIE.
Seeing as Viela Bio, Inc. (NASDAQ:VIE) has experienced declining sentiment from hedge fund managers, logic holds that there lies a certain "tier" of funds who were dropping their positions entirely heading into Q4. At the top of the heap, Steve Cohen's Point72 Asset Management said goodbye to the largest stake of all the hedgies tracked by Insider Monkey, valued at an estimated $5.5 million in stock, and Matthew L Pinz's Pinz Capital was right behind this move, as the fund sold off about $1.3 million worth. These bearish behaviors are interesting, as total hedge fund interest was cut by 3 funds heading into Q4.
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Viela Bio, Inc. (NASDAQ:VIE) but similarly valued. We will take a look at Y-mAbs Therapeutics, Inc. (NASDAQ:YMAB), Sapiens International Corporation N.V. (NASDAQ:SPNS), MAG Silver Corporation (NYSE:MAG), Ligand Pharmaceuticals Inc. (NASDAQ:LGND), CorVel Corporation (NASDAQ:CRVL), GCP Applied Technologies Inc. (NYSE:GCP), and Cytokinetics, Inc. (NASDAQ:CYTK). This group of stocks' market values match VIE's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position YMAB,10,113072,-3 SPNS,11,50259,5 MAG,10,228135,0 LGND,22,258838,0 CRVL,12,120490,-3 GCP,21,375404,0 CYTK,26,429147,0 Average,16,225049,-0.1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 16 hedge funds with bullish positions and the average amount invested in these stocks was $225 million. That figure was $145 million in VIE's case. Cytokinetics, Inc. (NASDAQ:CYTK) is the most popular stock in this table. On the other hand Y-mAbs Therapeutics, Inc. (NASDAQ:YMAB) is the least popular one with only 10 bullish hedge fund positions. Compared to these stocks Viela Bio, Inc. (NASDAQ:VIE) is even less popular than YMAB. Our overall hedge fund sentiment score for VIE is 20.8. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Hedge funds clearly dropped the ball on VIE as the stock delivered strong returns, though hedge funds' consensus picks still generated respectable returns. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 30.7% in 2020 through November 27th and still beat the market by 16.1 percentage points. A small number of hedge funds were also right about betting on VIE as the stock returned 40.6% since Q3 (through November 27th) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.