Hedge Funds and other institutional investors have just completed filing their 13Fs with the Securities and Exchange Commission, revealing their equity portfolios as of the end of September. At Insider Monkey, we follow nearly 817 active hedge funds and notable investors and by analyzing their 13F filings, we can determine the stocks that they are collectively bullish on. One of their picks is InflaRx N.V. (NASDAQ:IFRX), so let’s take a closer look at the sentiment that surrounds it in the current quarter.
InflaRx N.V. (NASDAQ:IFRX) shareholders have witnessed a decrease in activity from the world’s largest hedge funds of late. InflaRx N.V. (NASDAQ:IFRX) was in 6 hedge funds’ portfolios at the end of September. The all time high for this statistics is 15. There were 11 hedge funds in our database with IFRX holdings at the end of June. Our calculations also showed that IFRX isn’t among the 30 most popular stocks among hedge funds (click for Q3 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 66 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.
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. 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. You can subscribe to our free daily newsletter on our website. With all of this in mind let’s take a look at the key hedge fund action encompassing InflaRx N.V. (NASDAQ:IFRX).
How have hedgies been trading InflaRx N.V. (NASDAQ:IFRX)?
Heading into the fourth quarter of 2020, a total of 6 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -45% from the previous quarter. On the other hand, there were a total of 5 hedge funds with a bullish position in IFRX a year ago. With the smart money’s sentiment swirling, there exists a select group of noteworthy hedge fund managers who were adding to their stakes substantially (or already accumulated large positions).
The largest stake in InflaRx N.V. (NASDAQ:IFRX) was held by Baker Bros. Advisors, which reported holding $4.3 million worth of stock at the end of September. It was followed by OrbiMed Advisors with a $2.9 million position. Other investors bullish on the company included Ikarian Capital, Birchview Capital, and Two Sigma Advisors. In terms of the portfolio weights assigned to each position Birchview Capital allocated the biggest weight to InflaRx N.V. (NASDAQ:IFRX), around 0.2% of its 13F portfolio. Ikarian Capital is also relatively very bullish on the stock, earmarking 0.05 percent of its 13F equity portfolio to IFRX.
Since InflaRx N.V. (NASDAQ:IFRX) has experienced falling interest from the entirety of the hedge funds we track, we can see that there exists a select few hedgies who sold off their entire stakes last quarter. At the top of the heap, Renaissance Technologies dropped the largest investment of the 750 funds monitored by Insider Monkey, comprising about $0.7 million in stock, and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital was right behind this move, as the fund dropped about $0.2 million worth. These moves are important to note, as aggregate hedge fund interest was cut by 5 funds last quarter.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as InflaRx N.V. (NASDAQ:IFRX) but similarly valued. We will take a look at Sierra Oncology, Inc. (NASDAQ:SRRA), La Jolla Pharmaceutical Company (NASDAQ:LJPC), Willis Lease Finance Corporation (NASDAQ:WLFC), Ambow Education Holding Ltd. (NYSE:AMBO), Aclaris Therapeutics, Inc. (NASDAQ:ACRS), Tonix Pharmaceuticals Holding Corp. (NASDAQ:TNXP), and Pro-Dex, Inc. (NASDAQ:PDEX). This group of stocks’ market caps are similar to IFRX’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 6 hedge funds with bullish positions and the average amount invested in these stocks was $31 million. That figure was $8 million in IFRX’s case. Aclaris Therapeutics, Inc. (NASDAQ:ACRS) is the most popular stock in this table. On the other hand Ambow Education Holding Ltd. (NYSE:AMBO) is the least popular one with only 1 bullish hedge fund positions. InflaRx N.V. (NASDAQ:IFRX) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for IFRX is 28.7. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 30.7% in 2020 through November 27th and surpassed the market again by 16.1 percentage points. Unfortunately IFRX wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); IFRX investors were disappointed as the stock returned -6.6% since the end of September (through 11/27) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
Disclosure: None. This article was originally published at Insider Monkey.