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Hedge Funds Souring On ASLAN Pharmaceuticals Limited (ASLN)

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 821 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, a week after the market trough. In this article we look at what those investors think of ASLAN Pharmaceuticals Limited (NASDAQ:ASLN).

ASLAN Pharmaceuticals Limited (NASDAQ:ASLN) shareholders have witnessed a decrease in hedge fund sentiment in recent months. Our calculations also showed that ASLN 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 51 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.

Michael Castor of Sio Capital

Michael Castor of Sio Capital

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 stocks recommended/scorned by legendary Bill Miller. 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. Keeping this in mind we’re going to take a peek at the fresh hedge fund action surrounding ASLAN Pharmaceuticals Limited (NASDAQ:ASLN).

What have hedge funds been doing with ASLAN Pharmaceuticals Limited (NASDAQ:ASLN)?

At the end of the first quarter, a total of 4 of the hedge funds tracked by Insider Monkey were long this stock, a change of -20% from one quarter earlier. On the other hand, there were a total of 2 hedge funds with a bullish position in ASLN 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.

Is ASLN A Good Stock To Buy?

According to Insider Monkey’s hedge fund database, Michael Castor’s Sio Capital has the number one position in ASLAN Pharmaceuticals Limited (NASDAQ:ASLN), worth close to $1.3 million, comprising 0.4% of its total 13F portfolio. On Sio Capital’s heels is Platinum Asset Management, managed by Kerr Neilson, which holds a $0.4 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Other professional money managers that hold long positions include Nathan Fischel’s DAFNA Capital Management, Renaissance Technologies and . In terms of the portfolio weights assigned to each position Sio Capital allocated the biggest weight to ASLAN Pharmaceuticals Limited (NASDAQ:ASLN), around 0.44% of its 13F portfolio. DAFNA Capital Management is also relatively very bullish on the stock, designating 0.04 percent of its 13F equity portfolio to ASLN.

We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Marshall Wace LLP. One hedge fund selling its entire position doesn’t always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don’t think this is the case in this case because none of the 750+ hedge funds tracked by Insider Monkey identified ASLN as a viable investment and initiated a position in the stock.

Let’s now review hedge fund activity in other stocks similar to ASLAN Pharmaceuticals Limited (NASDAQ:ASLN). These stocks are Electrameccanica Vehicles Corp. Ltd. (NASDAQ:SOLO), Aehr Test Systems (NASDAQ:AEHR), Sachem Capital Corp. (NYSE:SACH), and 1895 Bancorp of Wisconsin, Inc. (NASDAQ:BCOW). This group of stocks’ market values match ASLN’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
SOLO 2 159 1
AEHR 3 2320 0
SACH 2 434 -1
BCOW 1 109 0
Average 2 756 0

View table here if you experience formatting issues.

As you can see these stocks had an average of 2 hedge funds with bullish positions and the average amount invested in these stocks was $1 million. That figure was $2 million in ASLN’s case. Aehr Test Systems (NASDAQ:AEHR) is the most popular stock in this table. On the other hand 1895 Bancorp of Wisconsin, Inc. (NASDAQ:BCOW) is the least popular one with only 1 bullish hedge fund positions. Compared to these stocks ASLAN Pharmaceuticals Limited (NASDAQ:ASLN) is more popular among hedge funds. 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 returned 8.3% in 2020 through the end of May but still managed to beat the market by 13.2 percentage points. Hedge funds were also right about betting on ASLN as the stock returned 71.6% so far in Q2 (through the end of May) 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.

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