Hedge Funds Have Never Been This Bullish On Acceleron Pharma Inc (XLRN)
Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors' consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of Acceleron Pharma Inc (NASDAQ:XLRN).
Acceleron Pharma Inc (NASDAQ:XLRN) was in 38 hedge funds' portfolios at the end of March. XLRN has seen an increase in enthusiasm from smart money lately. There were 27 hedge funds in our database with XLRN positions at the end of the previous quarter. Our calculations also showed that XLRN 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.
Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. 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 51 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.
[caption id="attachment_55822" align="aligncenter" width="396"]
Thomas Steyer Founder of Farallon Capital[/caption]
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like this one. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we're going to check out the fresh hedge fund action surrounding Acceleron Pharma Inc (NASDAQ:XLRN).
What have hedge funds been doing with Acceleron Pharma Inc (NASDAQ:XLRN)?
Heading into the second quarter of 2020, a total of 38 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 41% from the fourth quarter of 2019. On the other hand, there were a total of 21 hedge funds with a bullish position in XLRN a year ago. With the smart money's positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were adding to their holdings substantially (or already accumulated large positions).
Among these funds, Farallon Capital held the most valuable stake in Acceleron Pharma Inc (NASDAQ:XLRN), which was worth $195.5 million at the end of the third quarter. On the second spot was Alkeon Capital Management which amassed $123.8 million worth of shares. Avoro Capital Advisors (venBio Select Advisor), Cormorant Asset Management, and Great Point Partners 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 Foresite Capital allocated the biggest weight to Acceleron Pharma Inc (NASDAQ:XLRN), around 6.01% of its 13F portfolio. Great Point Partners is also relatively very bullish on the stock, setting aside 5.03 percent of its 13F equity portfolio to XLRN.
As aggregate interest increased, specific money managers were leading the bulls' herd. Avoro Capital Advisors (venBio Select Advisor), managed by Behzad Aghazadeh, established the biggest position in Acceleron Pharma Inc (NASDAQ:XLRN). Avoro Capital Advisors (venBio Select Advisor) had $77.3 million invested in the company at the end of the quarter. Bihua Chen's Cormorant Asset Management also made a $74.1 million investment in the stock during the quarter. The following funds were also among the new XLRN investors: Brandon Haley's Holocene Advisors, Neil Shahrestani's Ikarian Capital, and D. E. Shaw's D E Shaw.
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Acceleron Pharma Inc (NASDAQ:XLRN) but similarly valued. We will take a look at Reata Pharmaceuticals, Inc. (NASDAQ:RETA), People's United Financial, Inc. (NASDAQ:PBCT), Steel Dynamics, Inc. (NASDAQ:STLD), and First American Financial Corp (NYSE:FAF). This group of stocks' market caps resemble XLRN's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position RETA,33,398437,4 PBCT,22,43269,0 STLD,27,330665,-8 FAF,40,525520,-2 Average,30.5,324473,-1.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 30.5 hedge funds with bullish positions and the average amount invested in these stocks was $324 million. That figure was $775 million in XLRN's case. First American Financial Corp (NYSE:FAF) is the most popular stock in this table. On the other hand People's United Financial, Inc. (NASDAQ:PBCT) is the least popular one with only 22 bullish hedge fund positions. Acceleron Pharma Inc (NASDAQ:XLRN) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 8.3% in 2020 through the end of May but beat the market by 13.2 percentage points. Unfortunately XLRN wasn't nearly as popular as these 10 stocks and hedge funds that were betting on XLRN were disappointed as the stock returned 10% during the same time period 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 many of these stocks already outperformed the market so far this year.
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Disclosure: None. This article was originally published at Insider Monkey.
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