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Hedge Funds Have Never Been This Bullish On Acceleron Pharma (XLRN)

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the second quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 5 years and analyze what the smart money thinks of Acceleron Pharma Inc (NASDAQ:XLRN) based on that data and determine whether they were really smart about the stock.

Is Acceleron Pharma Inc (NASDAQ:XLRN) worth your attention right now? Money managers were taking an optimistic view. The number of long hedge fund positions advanced by 10 in recent months. Acceleron Pharma Inc (NASDAQ:XLRN) was in 48 hedge funds’ portfolios at the end of June. The all time high for this statistics is 44. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that XLRN isn’t among the 30 most popular stocks among hedge funds (click for Q2 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.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 56 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 34% through August 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Brad Farber Atika Capital

Brad Farber of Atika Capital

At Insider Monkey we scour multiple sources to uncover the next great investment idea. 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 precious metals prices. So, we are checking out this junior gold mining stock.. We go through lists like the 10 most profitable companies in America 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. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. Keeping this in mind we’re going to analyze the fresh hedge fund action regarding Acceleron Pharma Inc (NASDAQ:XLRN).

How have hedgies been trading Acceleron Pharma Inc (NASDAQ:XLRN)?

Heading into the third quarter of 2020, a total of 48 of the hedge funds tracked by Insider Monkey were long this stock, a change of 26% from the previous quarter. The graph below displays the number of hedge funds with bullish position in XLRN over the last 20 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists an “upper tier” of key hedge fund managers who were upping their stakes considerably (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Farallon Capital, holds the number one position in Acceleron Pharma Inc (NASDAQ:XLRN). Farallon Capital has a $200.1 million position in the stock, comprising 1.6% of its 13F portfolio. The second most bullish fund manager is Alkeon Capital Management, managed by Panayotis Takis Sparaggis, which holds a $143 million position; the fund has 0.4% of its 13F portfolio invested in the stock. Other members of the smart money that hold long positions consist of Behzad Aghazadeh’s Avoro Capital Advisors (venBio Select Advisor), Bihua Chen’s Cormorant Asset Management and Brandon Haley’s Holocene Advisors. In terms of the portfolio weights assigned to each position Foresite Capital allocated the biggest weight to Acceleron Pharma Inc (NASDAQ:XLRN), around 3.56% of its 13F portfolio. Kingdon Capital is also relatively very bullish on the stock, earmarking 2.23 percent of its 13F equity portfolio to XLRN.

Consequently, specific money managers were breaking ground themselves. Paloma Partners, managed by Donald Sussman, established the largest position in Acceleron Pharma Inc (NASDAQ:XLRN). Paloma Partners had $10 million invested in the company at the end of the quarter. Brad Farber’s Atika Capital also initiated a $6.2 million position during the quarter. The following funds were also among the new XLRN investors: Steve Cohen’s Point72 Asset Management, Michael Gelband’s ExodusPoint Capital, and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Acceleron Pharma Inc (NASDAQ:XLRN) but similarly valued. These stocks are East West Bancorp, Inc. (NASDAQ:EWBC), Stericycle Inc (NASDAQ:SRCL), Sealed Air Corporation (NYSE:SEE), Flex Ltd. (NASDAQ:FLEX), Apache Corporation (NASDAQ:APA), Hyatt Hotels Corporation (NYSE:H), and Rexford Industrial Realty Inc (NYSE:REXR). This group of stocks’ market caps are closest to XLRN’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
EWBC 23 224008 -2
SRCL 23 699844 3
SEE 28 812312 -1
FLEX 34 941645 10
APA 40 590803 5
H 27 468490 3
REXR 24 179158 9
Average 28.4 559466 3.9

View table here if you experience formatting issues.

As you can see these stocks had an average of 28.4 hedge funds with bullish positions and the average amount invested in these stocks was $559 million. That figure was $803 million in XLRN’s case. Apache Corporation (NASDAQ:APA) is the most popular stock in this table. On the other hand East West Bancorp, Inc. (NASDAQ:EWBC) is the least popular one with only 23 bullish hedge fund positions. Compared to these stocks Acceleron Pharma Inc (NASDAQ:XLRN) is more popular among hedge funds. Our overall hedge fund sentiment score for XLRN is 90. 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. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 33% in 2020 through the end of August and still beat the market by 23.2 percentage points. Unfortunately XLRN wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on XLRN were disappointed as the stock returned 2.3% since the end of the second quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 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.