Hedge Funds Are Selling Athersys, Inc. (ATHX)

Is Athersys, Inc. (NASDAQ:ATHX) a good place to invest some of your money right now? We can gain invaluable insight to help us answer that question by studying the investment trends of top investors, who employ world-class Ivy League graduates, who are given immense resources and industry contacts to put their financial expertise to work. The top picks of these firms have historically outperformed the market when we account for known risk factors, making them very valuable investment ideas.

Athersys, Inc. (NASDAQ:ATHX) investors should pay attention to a decrease in support from the world’s most elite money managers recently. Athersys, Inc. (NASDAQ:ATHX) was in 6 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistics is 10. Our calculations also showed that ATHX 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.

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’ 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 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.


Cliff Asness of AQR Capital Management

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. Keeping this in mind let’s check out the fresh hedge fund action encompassing Athersys, Inc. (NASDAQ:ATHX).

How have hedgies been trading Athersys, Inc. (NASDAQ:ATHX)?

At the end of September, a total of 6 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -40% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards ATHX over the last 21 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Of the funds tracked by Insider Monkey, Israel Englander’s Millennium Management has the most valuable position in Athersys, Inc. (NASDAQ:ATHX), worth close to $1.3 million, corresponding to less than 0.1%% of its total 13F portfolio. Coming in second is John Overdeck and David Siegel of Two Sigma Advisors, with a $0.7 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Remaining hedge funds and institutional investors that hold long positions include Ken Griffin’s Citadel Investment Group, and Cliff Asness’s AQR Capital Management. In terms of the portfolio weights assigned to each position Two Sigma Advisors allocated the biggest weight to Athersys, Inc. (NASDAQ:ATHX), around 0.0019% of its 13F portfolio. Millennium Management is also relatively very bullish on the stock, designating 0.0016 percent of its 13F equity portfolio to ATHX.

Due to the fact that Athersys, Inc. (NASDAQ:ATHX) has witnessed falling interest from the smart money, it’s safe to say that there exists a select few hedge funds that elected to cut their entire stakes in the third quarter. At the top of the heap, David Harding’s Winton Capital Management sold off the biggest investment of the “upper crust” of funds monitored by Insider Monkey, worth about $0.2 million in stock. D. E. Shaw’s fund, D E Shaw, also said goodbye to its stock, about $0.1 million worth. These transactions are interesting, as total hedge fund interest fell by 4 funds in the third quarter.

Let’s now review hedge fund activity in other stocks similar to Athersys, Inc. (NASDAQ:ATHX). These stocks are Immunic, Inc. (NASDAQ:IMUX), Ducommun Incorporated (NYSE:DCO), Barings BDC, Inc. (NYSE:BBDC), Central Pacific Financial Corp. (NYSE:CPF), CHP Merger Corp. (NASDAQ:CHPM), Pzena Investment Management Inc (NYSE:PZN), and Co-Diagnostics, Inc. (NASDAQ:CODX). This group of stocks’ market values match ATHX’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
IMUX 8 23977 -1
DCO 9 36746 1
BBDC 9 21050 1
CPF 14 42376 -2
CHPM 16 100935 16
PZN 4 5821 -2
CODX 5 3221 1
Average 9.3 33447 2

View table here if you experience formatting issues.

As you can see these stocks had an average of 9.3 hedge funds with bullish positions and the average amount invested in these stocks was $33 million. That figure was $2 million in ATHX’s case. CHP Merger Corp. (NASDAQ:CHPM) is the most popular stock in this table. On the other hand Pzena Investment Management Inc (NYSE:PZN) is the least popular one with only 4 bullish hedge fund positions. Athersys, Inc. (NASDAQ:ATHX) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for ATHX is 27.3. 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 ATHX wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); ATHX investors were disappointed as the stock returned -2.6% 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.

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