Hedge Funds Are Dumping Allogene Therapeutics, Inc. (ALLO)

In this article you are going to find out whether hedge funds think Allogene Therapeutics, Inc. (NASDAQ:ALLO) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It’s not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.

Is Allogene Therapeutics, Inc. (NASDAQ:ALLO) a worthy stock to buy now? Money managers were becoming less confident. The number of bullish hedge fund bets decreased by 5 in recent months. Allogene Therapeutics, Inc. (NASDAQ:ALLO) was in 21 hedge funds’ portfolios at the end of the third quarter of 2021. The all time high for this statistic is 26. Our calculations also showed that ALLO isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. Now we’re going to analyze the recent hedge fund action surrounding Allogene Therapeutics, Inc. (NASDAQ:ALLO).

Lei Zhang Hillhouse Capital

Lei Zhang of Hillhouse Capital Management

Do Hedge Funds Think ALLO Is A Good Stock To Buy Now?

At third quarter’s end, a total of 21 of the hedge funds tracked by Insider Monkey were long this stock, a change of -19% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in ALLO over the last 25 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Casdin Capital was the largest shareholder of Allogene Therapeutics, Inc. (NASDAQ:ALLO), with a stake worth $54 million reported as of the end of September. Trailing Casdin Capital was Wildcat Capital Management, which amassed a stake valued at $44.1 million. Woodline Partners, Hillhouse Capital Management, and Partner Fund Management 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 Wildcat Capital Management allocated the biggest weight to Allogene Therapeutics, Inc. (NASDAQ:ALLO), around 5.71% of its 13F portfolio. Copernicus Capital Management is also relatively very bullish on the stock, dishing out 4.67 percent of its 13F equity portfolio to ALLO.

Since Allogene Therapeutics, Inc. (NASDAQ:ALLO) has witnessed a decline in interest from hedge fund managers, we can see that there exists a select few fund managers who sold off their positions entirely heading into Q4. It’s worth mentioning that Renaissance Technologies sold off the biggest position of all the hedgies monitored by Insider Monkey, valued at an estimated $18.4 million in stock. Paul Marshall and Ian Wace’s fund, Marshall Wace LLP, also said goodbye to its stock, about $11.9 million worth. These transactions are important to note, as total hedge fund interest was cut by 5 funds heading into Q4.

Let’s now review hedge fund activity in other stocks similar to Allogene Therapeutics, Inc. (NASDAQ:ALLO). These stocks are Cerence Inc. (NASDAQ:CRNC), Meritage Homes Corp (NYSE:MTH), Six Flags Entertainment Corp (NYSE:SIX), Millicom International Cellular S.A. (NASDAQ:TIGO), VEON Ltd. (NASDAQ:VEON), Arena Pharmaceuticals, Inc. (NASDAQ:ARNA), and BRP Group, Inc. (NASDAQ:BRP). This group of stocks’ market valuations are similar to ALLO’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CRNC 18 105845 -3
MTH 27 370507 7
SIX 42 1046474 6
TIGO 7 57120 0
VEON 15 81991 2
ARNA 35 619838 1
BRP 21 194072 8
Average 23.6 353692 3

View table here if you experience formatting issues.

As you can see these stocks had an average of 23.6 hedge funds with bullish positions and the average amount invested in these stocks was $354 million. That figure was $206 million in ALLO’s case. Six Flags Entertainment Corp (NYSE:SIX) is the most popular stock in this table. On the other hand Millicom International Cellular S.A. (NASDAQ:TIGO) is the least popular one with only 7 bullish hedge fund positions. Allogene Therapeutics, Inc. (NASDAQ:ALLO) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for ALLO is 44.2. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 29.6% in 2021 and surpassed the market again by 3.6 percentage points. Unfortunately ALLO wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); ALLO investors were disappointed as the stock returned -41.9% since the end of September (through 12/31) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2021.

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