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FibroGen Inc (FGEN): Hedge Fund Sentiment Unchanged

Before we spend days researching a stock idea we’d like to take a look at how hedge funds and billionaire investors recently traded that stock. S&P 500 Index ETF (SPY) lost 8.7% through October 26th. Forty percent of the S&P 500 constituents were down more than 10%. The average return of a randomly picked stock in the index is -9.5%. This means you (or a monkey throwing a dart) have less than an even chance of beating the market by randomly picking a stock. On the other hand, the top 25 most popular S&P 500 stocks among hedge funds had an average loss of 8.8%. In this article, we will take a look at what hedge funds think about FibroGen Inc (NASDAQ:FGEN).

FibroGen Inc (NASDAQ:FGEN) shares haven’t seen a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 17 hedge funds’ portfolios at the end of the third quarter of 2018. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Lions Gate Entertainment Corporation (NYSE:LGF-B), Euronet Worldwide, Inc. (NASDAQ:EEFT), and EPR Properties (NYSE:EPR) to gather more data points.

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 has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 18 percentage points since May 2014 through December 3, 2018 (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 24% through December 3, 2018. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Lei Zhang Hillhouse Capital

Let’s view the key hedge fund action surrounding FibroGen Inc (NASDAQ:FGEN).

Hedge fund activity in FibroGen Inc (NASDAQ:FGEN)

At the end of the third quarter, a total of 17 of the hedge funds tracked by Insider Monkey held long positions in this stock, representing no change from the second quarter of 2018. By comparison, 22 hedge funds held shares or bullish call options in FGEN heading into this year. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

FGEN_dec2018

The largest stake in FibroGen Inc (NASDAQ:FGEN) was held by Hillhouse Capital Management, which reported holding $163.2 million worth of stock at the end of September. It was followed by EcoR1 Capital with a $122.5 million position. Other investors bullish on the company included Farallon Capital, Adage Capital Management, and EcoR1 Capital.

Seeing as FibroGen Inc (NASDAQ:FGEN) has faced bearish sentiment from the aggregate hedge fund industry, we can see that there were a few hedge funds that elected to cut their full holdings in the third quarter. Interestingly, Zach Schreiber’s Point State Capital dumped the largest investment of all the hedgies monitored by Insider Monkey, valued at close to $50.7 million in stock. Ken Griffin’s fund, Citadel Investment Group, also said goodbye to its stock, about $0.3 million worth. These transactions are interesting, as total hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s also examine hedge fund activity in other stocks similar to FibroGen Inc (NASDAQ:FGEN). These stocks are Lions Gate Entertainment Corporation (NYSE:LGF-B), Euronet Worldwide, Inc. (NASDAQ:EEFT), EPR Properties (NYSE:EPR), and New York Community Bancorp, Inc. (NYSE:NYCB). This group of stocks’ market caps are similar to FGEN’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
LGF-B 14 478134 -1
EEFT 24 213065 6
EPR 13 56577 1
NYCB 12 66274 0
Average 15.75 203513 1.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 15.75 hedge funds with bullish positions and the average amount invested in these stocks was $204 million. That figure was $468 million in FGEN’s case. Euronet Worldwide, Inc. (NASDAQ:EEFT) is the most popular stock in this table. On the other hand New York Community Bancorp, Inc. (NYSE:NYCB) is the least popular one with only 12 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. In this regard EEFT might be a better candidate to consider a long position.

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

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