Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds' and successful investors' positions as of the end of the first quarter. You can find articles about an individual hedge fund's trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 4.5 years and analyze what the smart money thinks of Akcea Therapeutics, Inc. (NASDAQ:AKCA) based on that data and determine whether they were really smart about the stock.
Akcea Therapeutics, Inc. (NASDAQ:AKCA) was in 11 hedge funds' portfolios at the end of the first quarter of 2020. AKCA has experienced an increase in activity from the world's largest hedge funds lately. There were 10 hedge funds in our database with AKCA positions at the end of the previous quarter. Our calculations also showed that AKCA 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). Video: Watch our video about the top 5 most popular hedge fund stocks.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
[caption id="attachment_278362" align="aligncenter" width="400"] Daniel Och, Founder of OZ Management[/caption]
At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a "weekend trading strategy", so we look into his strategy's picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller's investor letter. 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. Keeping this in mind we're going to analyze the new hedge fund action regarding Akcea Therapeutics, Inc. (NASDAQ:AKCA).
What does smart money think about Akcea Therapeutics, Inc. (NASDAQ:AKCA)?
Heading into the second quarter of 2020, a total of 11 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 10% from the fourth quarter of 2019. Below, you can check out the change in hedge fund sentiment towards AKCA over the last 18 quarters. With the smart money's sentiment swirling, there exists an "upper tier" of notable hedge fund managers who were upping their stakes considerably (or already accumulated large positions).
The largest stake in Akcea Therapeutics, Inc. (NASDAQ:AKCA) was held by D E Shaw, which reported holding $4.5 million worth of stock at the end of September. It was followed by Marshall Wace LLP with a $1.6 million position. Other investors bullish on the company included Citadel Investment Group, Millennium Management, and Motley Fool Asset Management. In terms of the portfolio weights assigned to each position Motley Fool Asset Management allocated the biggest weight to Akcea Therapeutics, Inc. (NASDAQ:AKCA), around 0.11% of its 13F portfolio. Tudor Investment Corp is also relatively very bullish on the stock, setting aside 0.04 percent of its 13F equity portfolio to AKCA.
Consequently, key money managers have been driving this bullishness. Marshall Wace LLP, managed by Paul Marshall and Ian Wace, initiated the largest position in Akcea Therapeutics, Inc. (NASDAQ:AKCA). Marshall Wace LLP had $1.6 million invested in the company at the end of the quarter. Joel Greenblatt's Gotham Asset Management also made a $0.3 million investment in the stock during the quarter. The other funds with brand new AKCA positions are Greg Eisner's Engineers Gate Manager and Chuck Royce's Royce & Associates.
Let's check out hedge fund activity in other stocks - not necessarily in the same industry as Akcea Therapeutics, Inc. (NASDAQ:AKCA) but similarly valued. We will take a look at Tootsie Roll Industries, Inc. (NYSE:TR), Western Midstream Partners, LP (NYSE:WES), Amarin Corporation plc (NASDAQ:AMRN), and HB Fuller Co (NYSE:FUL). All of these stocks' market caps are closest to AKCA's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position TR,14,68255,-3 WES,12,27993,-1 AMRN,39,328086,3 FUL,18,124227,4 Average,20.75,137140,0.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 20.75 hedge funds with bullish positions and the average amount invested in these stocks was $137 million. That figure was $12 million in AKCA's case. Amarin Corporation plc (NASDAQ:AMRN) is the most popular stock in this table. On the other hand Western Midstream Partners, LP (NYSE:WES) is the least popular one with only 12 bullish hedge fund positions. Compared to these stocks Akcea Therapeutics, Inc. (NASDAQ:AKCA) is even less popular than WES. Hedge funds dodged a bullet by taking a bearish stance towards AKCA. 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 12.3% in 2020 through June 30th but managed to beat the market by 15.5 percentage points. Unfortunately AKCA wasn't nearly as popular as these 10 stocks (hedge fund sentiment was very bearish); AKCA investors were disappointed as the stock returned -4.2% during the second 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 10 most popular stocks among hedge funds as most of these stocks already outperformed the market so far in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.