At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards ChemoCentryx Inc (NASDAQ:CCXI).
ChemoCentryx Inc (NASDAQ:CCXI) investors should pay attention to an increase in enthusiasm from smart money recently. CCXI was in 30 hedge funds’ portfolios at the end of March. There were 23 hedge funds in our database with CCXI positions at the end of the previous quarter. Our calculations also showed that CCXI isn’t among the 30 most popular stocks among hedge funds (click for Q1 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 58 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 leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out trades like this one. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now we’re going to review the fresh hedge fund action encompassing ChemoCentryx Inc (NASDAQ:CCXI).
What have hedge funds been doing with ChemoCentryx Inc (NASDAQ:CCXI)?
Heading into the second quarter of 2020, a total of 30 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 30% from the fourth quarter of 2019. On the other hand, there were a total of 23 hedge funds with a bullish position in CCXI a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, RA Capital Management was the largest shareholder of ChemoCentryx Inc (NASDAQ:CCXI), with a stake worth $167.8 million reported as of the end of September. Trailing RA Capital Management was Consonance Capital Management, which amassed a stake valued at $92.3 million. Cormorant Asset Management, Baker Bros. Advisors, 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 Consonance Capital Management allocated the biggest weight to ChemoCentryx Inc (NASDAQ:CCXI), around 6.87% of its 13F portfolio. Eversept Partners is also relatively very bullish on the stock, dishing out 5.9 percent of its 13F equity portfolio to CCXI.
Now, some big names have been driving this bullishness. Mangrove Partners, managed by Nathaniel August, initiated the most outsized position in ChemoCentryx Inc (NASDAQ:CCXI). Mangrove Partners had $23.6 million invested in the company at the end of the quarter. Jeffrey Jay and David Kroin’s Great Point Partners also made a $14.4 million investment in the stock during the quarter. The following funds were also among the new CCXI investors: Brian Ashford-Russell and Tim Woolley’s Polar Capital, Steve Cohen’s Point72 Asset Management, and Noam Gottesman’s GLG Partners.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as ChemoCentryx Inc (NASDAQ:CCXI) but similarly valued. We will take a look at JetBlue Airways Corporation (NASDAQ:JBLU), Lazard Ltd (NYSE:LAZ), Valvoline Inc. (NYSE:VVV), and Compania Cervecerias Unidas S.A. (NYSE:CCU). This group of stocks’ market caps are closest to CCXI’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 25.25 hedge funds with bullish positions and the average amount invested in these stocks was $234 million. That figure was $562 million in CCXI’s case. Valvoline Inc. (NYSE:VVV) is the most popular stock in this table. On the other hand Compania Cervecerias Unidas S.A. (NYSE:CCU) is the least popular one with only 11 bullish hedge fund positions. ChemoCentryx Inc (NASDAQ:CCXI) is not the most popular stock in this group but hedge fund interest is still above average. 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 8.3% in 2020 through the end of May but still beat the market by 13.2 percentage points. Hedge funds were also right about betting on CCXI as the stock returned 55.3% in Q2 (through the end of May) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.