We at Insider Monkey have gone over 821 13F filings that hedge funds and prominent investors are required to file by the SEC The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, near the height of the coronavirus market crash. In this article, we look at what those funds think of Alector, Inc. (NASDAQ:ALEC) based on that data.
Is Alector, Inc. (NASDAQ:ALEC) going to take off soon? The smart money is becoming hopeful. The number of bullish hedge fund bets inched up by 2 recently. Our calculations also showed that ALEC 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). ALEC was in 15 hedge funds’ portfolios at the end of March. There were 13 hedge funds in our database with ALEC positions at the end of the previous quarter.
Video: Watch our video about the top 5 most popular hedge fund stocks.
If you’d ask most traders, hedge funds are assumed to be underperforming, old investment vehicles of yesteryear. While there are over 8000 funds trading at the moment, Our experts hone in on the top tier of this club, approximately 850 funds. These investment experts manage the majority of the hedge fund industry’s total capital, and by tracking their matchless equity investments, Insider Monkey has found a number of investment strategies that have historically outstripped the market. Insider Monkey’s flagship short hedge fund strategy outperformed the S&P 500 short ETFs by around 20 percentage points per year since its inception in March 2017. Our portfolio of short stocks lost 36% since February 2017 (through May 18th) even though the market was up 30% during the same period. We just shared a list of 8 short targets in our latest quarterly update .
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, blockchain technology’s influence will go beyond online payments. So, we are checking out this futurist’s moonshot opportunities in tech stocks. We interview hedge fund managers and ask them about their best ideas. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind let’s view the fresh hedge fund action surrounding Alector, Inc. (NASDAQ:ALEC).
How have hedgies been trading Alector, Inc. (NASDAQ:ALEC)?
At the end of the first quarter, a total of 15 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 15% from the fourth quarter of 2019. By comparison, 12 hedge funds held shares or bullish call options in ALEC a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, OrbiMed Advisors held the most valuable stake in Alector, Inc. (NASDAQ:ALEC), which was worth $200.9 million at the end of the third quarter. On the second spot was RA Capital Management which amassed $99.6 million worth of shares. Deerfield Management, Casdin Capital, and Perceptive Advisors 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 OrbiMed Advisors allocated the biggest weight to Alector, Inc. (NASDAQ:ALEC), around 3.38% of its 13F portfolio. RA Capital Management is also relatively very bullish on the stock, earmarking 3.15 percent of its 13F equity portfolio to ALEC.
As industrywide interest jumped, specific money managers have been driving this bullishness. Holocene Advisors, managed by Brandon Haley, assembled the biggest position in Alector, Inc. (NASDAQ:ALEC). Holocene Advisors had $9.6 million invested in the company at the end of the quarter. Julian Baker and Felix Baker’s Baker Bros. Advisors also made a $6.8 million investment in the stock during the quarter. The other funds with new positions in the stock are Ken Griffin’s Citadel Investment Group and Benjamin A. Smith’s Laurion Capital Management.
Let’s also examine hedge fund activity in other stocks similar to Alector, Inc. (NASDAQ:ALEC). These stocks are EPR Properties (NYSE:EPR), Wyndham Destinations, Inc. (NYSE:WYND), Fulton Financial Corp (NASDAQ:FULT), and Eidos Therapeutics, Inc. (NASDAQ:EIDX). This group of stocks’ market values are similar to ALEC’s market value.
|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 18.5 hedge funds with bullish positions and the average amount invested in these stocks was $159 million. That figure was $417 million in ALEC’s case. Wyndham Destinations, Inc. (NYSE:WYND) is the most popular stock in this table. On the other hand Eidos Therapeutics, Inc. (NASDAQ:EIDX) is the least popular one with only 12 bullish hedge fund positions. Alector, Inc. (NASDAQ:ALEC) is not the least popular stock in this group but hedge fund interest is still below average. 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 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 13.3% in 2020 through June 25th and surpassed the market by 16.8 percentage points. Unfortunately ALEC wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); ALEC investors were disappointed as the stock returned 17.2% during 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.
Disclosure: None. This article was originally published at Insider Monkey.