Hedge Funds Cashed Out Of Amicus Therapeutics, Inc. (FOLD) Too Early

Amid an overall bull market, many stocks that smart money investors were collectively bullish on surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Our research shows that most of the stocks that smart money likes historically generate strong risk-adjusted returns. That’s why we weren’t surprised when hedge funds’ top 20 large-cap stock picks generated a return of 37.6% in 2019 (through the end of November) and outperformed the broader market benchmark by 9.9 percentage points.This is why following the smart money sentiment is a useful tool at identifying the next stock to invest in.

Is Amicus Therapeutics, Inc. (NASDAQ:FOLD) a healthy stock for your portfolio? The smart money is in a pessimistic mood. The number of long hedge fund positions dropped by 3 in recent months. Our calculations also showed that FOLD isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). FOLD was in 26 hedge funds’ portfolios at the end of September. There were 29 hedge funds in our database with FOLD holdings at the end of the previous quarter.
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 91% since May 2014 and outperformed the Russell 2000 ETFs by nearly 40 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Ken Griffin

Ken Griffin of Citadel Investment Group

Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world’s most bearish hedge fund that’s more convinced than ever that a crash is coming, our long-short investment strategy doesn’t rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds‘ buy/sell signals. Let’s take a look at the fresh hedge fund action regarding Amicus Therapeutics, Inc. (NASDAQ:FOLD).

What does smart money think about Amicus Therapeutics, Inc. (NASDAQ:FOLD)?

Heading into the fourth quarter of 2019, a total of 26 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -10% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in FOLD over the last 17 quarters. With hedge funds’ capital changing hands, there exists a select group of key hedge fund managers who were upping their holdings considerably (or already accumulated large positions).

No of Hedge Funds with FOLD Positions

More specifically, Perceptive Advisors was the largest shareholder of Amicus Therapeutics, Inc. (NASDAQ:FOLD), with a stake worth $197.4 million reported as of the end of September. Trailing Perceptive Advisors was Redmile Group, which amassed a stake valued at $182.8 million. venBio Select Advisor, Palo Alto Investors, and Citadel Investment Group 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 Redmile Group allocated the biggest weight to Amicus Therapeutics, Inc. (NASDAQ:FOLD), around 6.12% of its portfolio. Perceptive Advisors is also relatively very bullish on the stock, designating 5.32 percent of its 13F equity portfolio to FOLD.

Since Amicus Therapeutics, Inc. (NASDAQ:FOLD) has faced bearish sentiment from the aggregate hedge fund industry, it’s easy to see that there were a few hedgies that elected to cut their entire stakes heading into Q4. It’s worth mentioning that Jacob Doft’s Highline Capital Management dumped the biggest investment of all the hedgies followed by Insider Monkey, valued at about $18.9 million in stock, and Paul Marshall and Ian Wace’s Marshall Wace was right behind this move, as the fund sold off about $9.3 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest fell by 3 funds heading into Q4.

Let’s check out hedge fund activity in other stocks similar to Amicus Therapeutics, Inc. (NASDAQ:FOLD). We will take a look at WESCO International, Inc. (NYSE:WCC), Workiva Inc (NYSE:WK), TowneBank (NASDAQ:TOWN), and Worthington Industries, Inc. (NYSE:WOR). This group of stocks’ market valuations are similar to FOLD’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
WCC 18 446217 0
WK 19 172864 -1
TOWN 6 45663 -1
WOR 22 58920 9
Average 16.25 180916 1.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 16.25 hedge funds with bullish positions and the average amount invested in these stocks was $181 million. That figure was $691 million in FOLD’s case. Worthington Industries, Inc. (NYSE:WOR) is the most popular stock in this table. On the other hand TowneBank (NASDAQ:TOWN) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks Amicus Therapeutics, Inc. (NASDAQ:FOLD) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Hedge funds were also right about betting on FOLD as the stock returned 30.7% during the first two months of Q4 and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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