Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

Did Hedge Funds Make The Right Call On FibroGen Inc (FGEN) ?

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 thoughtFibroGen Inc (NASDAQ:FGEN) was a good investment heading into the second quarter and how the stock traded in comparison to the top hedge fund picks.

Is FibroGen Inc (NASDAQ:FGEN) the right pick for your portfolio? The best stock pickers were taking an optimistic view. The number of long hedge fund positions moved up by 1 in recent months. Our calculations also showed that FGEN 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). FGEN was in 22 hedge funds’ portfolios at the end of March. There were 21 hedge funds in our database with FGEN holdings at the end of the previous quarter.

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 was 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Jim Tananbaum - Foresite Capital

Jim Tananbaum of Foresite Capital

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, on one site we found out that NBA champion Isiah Thomas is now the CEO of this cannabis company. The same site also talks about a snack manufacturer that’s growing at 30% annually. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. 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 if you have any good ideas send us an email. With all of this in mind we’re going to take a look at the latest hedge fund action surrounding FibroGen Inc (NASDAQ:FGEN).

How are hedge funds trading FibroGen Inc (NASDAQ:FGEN)?

At Q1’s end, a total of 22 of the hedge funds tracked by Insider Monkey were long this stock, a change of 5% from the fourth quarter of 2019. The graph below displays the number of hedge funds with bullish position in FGEN 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 FibroGen Inc (NASDAQ:FGEN) was held by Hillhouse Capital Management, which reported holding $137.5 million worth of stock at the end of September. It was followed by Farallon Capital with a $55.6 million position. Other investors bullish on the company included EcoR1 Capital, Sectoral Asset Management, and Rock Springs Capital Management. In terms of the portfolio weights assigned to each position EcoR1 Capital allocated the biggest weight to FibroGen Inc (NASDAQ:FGEN), around 3.2% of its 13F portfolio. Sectoral Asset Management is also relatively very bullish on the stock, setting aside 2.24 percent of its 13F equity portfolio to FGEN.

As aggregate interest increased, key money managers were leading the bulls’ herd. Rhenman & Partners Asset Management, managed by Henrik Rhenman, initiated the most outsized position in FibroGen Inc (NASDAQ:FGEN). Rhenman & Partners Asset Management had $8.7 million invested in the company at the end of the quarter. Phill Gross and Robert Atchinson’s Adage Capital Management also made a $1.7 million investment in the stock during the quarter. The other funds with new positions in the stock are Jim Tananbaum’s Foresite Capital, Peter Muller’s PDT Partners, and Sander Gerber’s Hudson Bay Capital Management.

Let’s check out hedge fund activity in other stocks similar to FibroGen Inc (NASDAQ:FGEN). We will take a look at Unum Group (NYSE:UNM), Rayonier Inc. (NYSE:RYN), Community Bank System, Inc. (NYSE:CBU), and MSC Industrial Direct Co Inc (NYSE:MSM). This group of stocks’ market values resemble FGEN’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
UNM 25 159751 -5
RYN 13 271594 -1
CBU 11 12275 1
MSM 23 240052 -7
Average 18 170918 -3

View table here if you experience formatting issues.

As you can see these stocks had an average of 18 hedge funds with bullish positions and the average amount invested in these stocks was $171 million. That figure was $283 million in FGEN’s case. Unum Group (NYSE:UNM) is the most popular stock in this table. On the other hand Community Bank System, Inc. (NYSE:CBU) is the least popular one with only 11 bullish hedge fund positions. FibroGen Inc (NASDAQ:FGEN) 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 12.3% in 2020 through June 30th but beat the market by 15.5 percentage points. Unfortunately FGEN wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on FGEN were disappointed as the stock returned 16.6% 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.

Follow Fibrogen Inc (NASDAQ:FGEN)
Trade (NASDAQ:FGEN) Now!

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