Did Hedge Funds Drop The Ball On Eidos Therapeutics, Inc. (EIDX) ?

Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips on the charts, usually don’t make them change their opinion towards a company. This time it may be different. During the fourth quarter of 2018 we observed increased volatility and small-cap stocks underperformed the market. Hedge fund investor letters indicated that they are cutting their overall exposure, closing out some position and doubling down on others. Let’s take a look at the hedge fund sentiment towards Eidos Therapeutics, Inc. (NASDAQ:EIDX) to find out whether it was one of their high conviction long-term ideas.

Is Eidos Therapeutics, Inc. (NASDAQ:EIDX) a buy, sell, or hold? Money managers are in a pessimistic mood. The number of long hedge fund positions fell by 6 recently. Our calculations also showed that eidx isn’t among the 30 most popular stocks among hedge funds.

In the eyes of most traders, hedge funds are assumed to be slow, old financial vehicles of years past. While there are more than 8000 funds with their doors open today, Our researchers hone in on the top tier of this group, around 750 funds. These hedge fund managers administer the majority of the hedge fund industry’s total asset base, and by keeping an eye on their matchless equity investments, Insider Monkey has found several investment strategies that have historically surpassed the broader indices. Insider Monkey’s flagship hedge fund strategy exceeded the S&P 500 index by nearly 5 percentage points a year since its inception in May 2014 through early November 2018. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 27.5% since February 2017 (through March 12th) even though the market was up nearly 25% during the same period. We just shared a list of 6 short targets in our latest quarterly update and they are already down an average of 6% in less than a month.

Peter Kolchinsky

Let’s take a gander at the fresh hedge fund action regarding Eidos Therapeutics, Inc. (NASDAQ:EIDX).

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

At Q4’s end, a total of 8 of the hedge funds tracked by Insider Monkey were long this stock, a change of -43% from the previous quarter. The graph below displays the number of hedge funds with bullish position in EIDX over the last 14 quarters. With hedge funds’ sentiment swirling, there exists an “upper tier” of key hedge fund managers who were adding to their stakes substantially (or already accumulated large positions).

No of Hedge Funds with EIDX Positions

Among these funds, RA Capital Management held the most valuable stake in Eidos Therapeutics, Inc. (NASDAQ:EIDX), which was worth $59.2 million at the end of the fourth quarter. On the second spot was Viking Global which amassed $27.3 million worth of shares. Moreover, Redmile Group, Perceptive Advisors, and Cormorant Asset Management were also bullish on Eidos Therapeutics, Inc. (NASDAQ:EIDX), allocating a large percentage of their portfolios to this stock.

Due to the fact that Eidos Therapeutics, Inc. (NASDAQ:EIDX) has experienced a decline in interest from the aggregate hedge fund industry, logic holds that there exists a select few hedge funds that slashed their entire stakes heading into Q3. At the top of the heap, James E. Flynn’s Deerfield Management dropped the biggest investment of all the hedgies monitored by Insider Monkey, worth about $4.2 million in stock. Lei Zhang’s fund, Hillhouse Capital Management, also said goodbye to its stock, about $2.2 million worth. These transactions are interesting, as aggregate hedge fund interest was cut by 6 funds heading into Q3.

Let’s now take a look at hedge fund activity in other stocks similar to Eidos Therapeutics, Inc. (NASDAQ:EIDX). These stocks are Avianca Holdings SA (NYSE:AVH), AquaVenture Holdings Limited (NYSE:WAAS), Bridge Bancorp, Inc. (NASDAQ:BDGE), and Enphase Energy Inc (NASDAQ:ENPH). All of these stocks’ market caps are closest to EIDX’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
AVH 4 5892 0
WAAS 11 26946 -1
BDGE 9 86830 -2
ENPH 18 93097 -1
Average 10.5 53191 -1

View table here if you experience formatting issues.

As you can see these stocks had an average of 10.5 hedge funds with bullish positions and the average amount invested in these stocks was $53 million. That figure was $116 million in EIDX’s case. Enphase Energy Inc (NASDAQ:ENPH) is the most popular stock in this table. On the other hand Avianca Holdings SA (NYSE:AVH) is the least popular one with only 4 bullish hedge fund positions. Eidos Therapeutics, Inc. (NASDAQ:EIDX) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. A small number of hedge funds were also right about betting on EIDX as the stock returned 78.6% and outperformed the market by an even larger margin.

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