2019 Review: Most Favored Hedge Fund Stocks vs. Amicus Therapeutics, Inc. (FOLD)

2018’s fourth quarter was a rough one for investors and many hedge funds, which were naturally unable to overcome the big dip in the broad market, as the S&P 500 fell by about 4.8% during 2018 and average hedge fund losing about 1%. The Russell 2000, composed of smaller companies, performed even worse, trailing the S&P by more than 6 percentage points, as investors fled less-known quantities for safe havens. Luckily hedge funds were shifting their holdings into large-cap stocks. The 20 most popular hedge fund stocks actually generated an average return of 41.3% in 2019 and outperformed the S&P 500 ETF by more than 10 percentage points. In this article we will study how hedge fund sentiment towards Amicus Therapeutics, Inc. (NASDAQ:FOLD) changed during the third quarter and how the stock performed in comparison to hedge fund consensus stocks.

Is Amicus Therapeutics, Inc. (NASDAQ:FOLD) the right investment to pursue these days? The best stock pickers are selling. The number of bullish hedge fund positions went down by 3 lately. Our calculations also showed that FOLD isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video at the end of this article for Q2 rankings). FOLD was in 26 hedge funds’ portfolios at the end of September. There were 29 hedge funds in our database with FOLD holdings at the end of the previous quarter.

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 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 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.

William Leland Edwards of Palo Alto Investors

William Leland Edwards of Palo Alto Investors

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. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. 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 is still extremely cheap despite already gaining 20 percent. With all of this in mind let’s review the latest hedge fund action regarding Amicus Therapeutics, Inc. (NASDAQ:FOLD).

What have hedge funds been doing with Amicus Therapeutics, Inc. (NASDAQ:FOLD)?

At the end of the third quarter, a total of 26 of the hedge funds tracked by Insider Monkey were long this stock, a change of -10% from the second quarter of 2019. On the other hand, there were a total of 30 hedge funds with a bullish position in FOLD a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Perceptive Advisors was the largest shareholder of Amicus Therapeutics, Inc. (NASDAQ:FOLD), with a stake worth $197.4 million reported as of the end of September. Trailing Perceptive Advisors was Redmile Group, which amassed a stake valued at $182.8 million. venBio Select Advisor, Palo Alto Investors, 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 Redmile Group allocated the biggest weight to Amicus Therapeutics, Inc. (NASDAQ:FOLD), around 6.12% of its 13F portfolio. Perceptive Advisors is also relatively very bullish on the stock, setting aside 5.32 percent of its 13F equity portfolio to FOLD.

Due to the fact that Amicus Therapeutics, Inc. (NASDAQ:FOLD) has faced a decline in interest from hedge fund managers, we can see that there were a few hedge funds that elected to cut their full holdings in the third quarter. Interestingly, Jacob Doft’s Highline Capital Management cut the largest stake of the “upper crust” of funds watched by Insider Monkey, totaling an estimated $18.9 million in stock. Paul Marshall and Ian Wace’s fund, Marshall Wace, also dumped its stock, about $9.3 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest dropped by 3 funds in the third quarter.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Amicus Therapeutics, Inc. (NASDAQ:FOLD) but similarly valued. These stocks are WESCO International, Inc. (NYSE:WCC), Workiva Inc (NYSE:WK), TowneBank (NASDAQ:TOWN), and Worthington Industries, Inc. (NYSE:WOR). This group of stocks’ market valuations match FOLD’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
WCC 18 446217 0
WK 19 172864 -1
TOWN 6 45663 -1
WOR 22 58920 9
Average 16.25 180916 1.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 16.25 hedge funds with bullish positions and the average amount invested in these stocks was $181 million. That figure was $691 million in FOLD’s case. Worthington Industries, Inc. (NYSE:WOR) is the most popular stock in this table. On the other hand TowneBank (NASDAQ:TOWN) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks Amicus Therapeutics, Inc. (NASDAQ:FOLD) is more popular among hedge funds. 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 10.1 percentage points. Unfortunately FOLD wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on FOLD were disappointed as the stock returned 1.7% in 2019 and trailed 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 65 percent of these stocks outperformed the market in 2019.
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

Disclosure: None. This article was originally published at Insider Monkey.