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Did Hedge Funds Make The Right Call On ChemoCentryx Inc (CCXI) ?

The latest 13F reporting period has come and gone, and Insider Monkey have plowed through 821 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, a week after the market trough. Now, we are almost done with the second quarter. Investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned almost 20% this quarter. In this article you are going to find out whether hedge funds thoughtChemoCentryx Inc (NASDAQ:CCXI) was a good investment heading into the second quarter and how the stock traded in comparison to the top hedge fund picks.

ChemoCentryx Inc (NASDAQ:CCXI) was in 30 hedge funds’ portfolios at the end of the first quarter of 2020. CCXI shareholders have witnessed an increase in activity from the world’s largest hedge funds recently. There were 23 hedge funds in our database with CCXI positions at the end of the previous quarter. Our calculations also showed that CCXI 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.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 101% since March 2017 and outperformed the S&P 500 ETFs by more than 58 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Jeffrey Ray - Great Point Partners

Jeffrey Jay of Great Point Partners

At Insider Monkey we scour multiple sources to uncover the next great investment idea. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Hedge fund sentiment towards Tesla reached its all time high at the end of 2019 and Tesla shares more than tripled this year. We are trying to identify other EV revolution winners, so we are checking out this tiny lithium stock. Keeping this in mind let’s take a peek at the recent hedge fund action surrounding ChemoCentryx Inc (NASDAQ:CCXI).

How are hedge funds trading ChemoCentryx Inc (NASDAQ:CCXI)?

At the end of the first quarter, a total of 30 of the hedge funds tracked by Insider Monkey were long this stock, a change of 30% from the fourth quarter of 2019. Below, you can check out the change in hedge fund sentiment towards CCXI over the last 18 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in ChemoCentryx Inc (NASDAQ:CCXI) was held by RA Capital Management, which reported holding $167.8 million worth of stock at the end of September. It was followed by Consonance Capital Management with a $92.3 million position. Other investors bullish on the company included Cormorant Asset Management, Baker Bros. Advisors, and Citadel Investment Group. In terms of the portfolio weights assigned to each position Consonance Capital Management allocated the biggest weight to ChemoCentryx Inc (NASDAQ:CCXI), around 6.87% of its 13F portfolio. Eversept Partners is also relatively very bullish on the stock, designating 5.9 percent of its 13F equity portfolio to CCXI.

With a general bullishness amongst the heavyweights, some big names were leading the bulls’ herd. Mangrove Partners, managed by Nathaniel August, assembled the biggest position in ChemoCentryx Inc (NASDAQ:CCXI). Mangrove Partners had $23.6 million invested in the company at the end of the quarter. Jeffrey Jay and David Kroin’s Great Point Partners also initiated a $14.4 million position during the quarter. The following funds were also among the new CCXI investors: Brian Ashford-Russell and Tim Woolley’s Polar Capital, Steve Cohen’s Point72 Asset Management, and Noam Gottesman’s GLG Partners.

Let’s now take a look at hedge fund activity in other stocks similar to ChemoCentryx Inc (NASDAQ:CCXI). These stocks are JetBlue Airways Corporation (NASDAQ:JBLU), Lazard Ltd (NYSE:LAZ), Valvoline Inc. (NYSE:VVV), and Compania Cervecerias Unidas S.A. (NYSE:CCU). All of these stocks’ market caps are similar to CCXI’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
JBLU 36 189627 1
LAZ 15 392048 1
VVV 39 330953 12
CCU 11 23883 3
Average 25.25 234128 4.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 25.25 hedge funds with bullish positions and the average amount invested in these stocks was $234 million. That figure was $562 million in CCXI’s case. Valvoline Inc. (NYSE:VVV) is the most popular stock in this table. On the other hand Compania Cervecerias Unidas S.A. (NYSE:CCU) is the least popular one with only 11 bullish hedge fund positions. ChemoCentryx Inc (NASDAQ:CCXI) is not the most popular stock in this group but hedge fund interest is still above 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 but still beat the market by 15.5 percentage points. Hedge funds were also right about betting on CCXI as the stock returned 43.2% in Q2 and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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