Did Hedge Funds Make The Right Call On Amicus Therapeutics, Inc. (FOLD)?

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 Amicus Therapeutics, Inc. (NASDAQ:FOLD) based on that data and determine whether they were really smart about the stock.

Is Amicus Therapeutics, Inc. (NASDAQ:FOLD) the right pick for your portfolio? Investors who are in the know were turning less bullish. The number of bullish hedge fund positions shrunk by 7 in recent months. Our calculations also showed that FOLD 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.

James Flynn Deerfield Management

James E. Flynn of Deerfield Management

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. Now we’re going to check out the recent hedge fund action encompassing Amicus Therapeutics, Inc. (NASDAQ:FOLD).

Hedge fund activity in Amicus Therapeutics, Inc. (NASDAQ:FOLD)

Heading into the second quarter of 2020, a total of 28 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -20% from the fourth quarter of 2019. By comparison, 30 hedge funds held shares or bullish call options in FOLD a year ago. With hedgies’ positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were upping their holdings substantially (or already accumulated large positions).

Is FOLD A Good Stock To Buy?

Among these funds, Perceptive Advisors held the most valuable stake in Amicus Therapeutics, Inc. (NASDAQ:FOLD), which was worth $232.7 million at the end of the third quarter. On the second spot was Redmile Group which amassed $232.7 million worth of shares. Avoro Capital Advisors (venBio Select Advisor), Palo Alto Investors, and D E Shaw 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 6.52% of its 13F portfolio. Perceptive Advisors is also relatively very bullish on the stock, dishing out 6.06 percent of its 13F equity portfolio to FOLD.

Because Amicus Therapeutics, Inc. (NASDAQ:FOLD) has experienced a decline in interest from the smart money, logic holds that there lies a certain “tier” of fund managers who were dropping their full holdings by the end of the first quarter. At the top of the heap, Eric Bannasch’s Cadian Capital dropped the biggest stake of the “upper crust” of funds watched by Insider Monkey, comprising close to $13.5 million in stock, and Ken Greenberg and David Kim’s Ghost Tree Capital was right behind this move, as the fund said goodbye to about $12.2 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest dropped by 7 funds by the end of the first quarter.

Let’s now take a look at hedge fund activity in other stocks similar to Amicus Therapeutics, Inc. (NASDAQ:FOLD). These stocks are Envista Holdings Corporation (NYSE:NVST), Tripadvisor Inc (NASDAQ:TRIP), Tegna Inc (NYSE:TGNA), and Parsley Energy Inc (NYSE:PE). All of these stocks’ market caps match FOLD’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
NVST 22 273772 -20
TRIP 30 492031 -9
TGNA 29 377379 10
PE 45 437697 -7
Average 31.5 395220 -6.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 31.5 hedge funds with bullish positions and the average amount invested in these stocks was $395 million. That figure was $842 million in FOLD’s case. Parsley Energy Inc (NYSE:PE) is the most popular stock in this table. On the other hand Envista Holdings Corporation (NYSE:NVST) is the least popular one with only 22 bullish hedge fund positions. Amicus Therapeutics, Inc. (NASDAQ:FOLD) is not the least popular stock in this group but hedge fund interest is still below average. 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 12.3% in 2020 through June 30th and still beat the market by 15.5 percentage points. A small number of hedge funds were also right about betting on FOLD as the stock returned 63.2% during the second quarter and outperformed the market by an even larger margin.

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