It’s a little-known fact that stock performance is not evenly distributed (i.e. you don’t have a 50/50 chance of picking a market-beating stock). In fact, despite the S&P 500 gaining about 5.2% between November 1, 2014 and October 30, 2015, less than 49% of the stocks in the index beat the market during that time. In contrast, the 30 stocks from the index which were the most popular among the investors that we track returned 9.5% during that time and 63% of them beat the market. This shows that while hedge funds get a lot of flak from the mainstream media for their performance, it can be rewarding to follow their moves using the right sets of data. Even then, there is never a fool proof strategy to generating returns, as even the collective wisdom of top hedge funds gets it wrong some times, as in the case of some of their top picks from the index like Micron and Anadarko. The data though, shows that following the collective wisdom of select hedge funds can be a very wise move overall.
Is Alder Biopharmaceuticals Inc (NASDAQ:ALDR) a buy here? Money managers are taking a bullish view. The number of bullish hedge fund positions went up by 5 recently. ALDR was in 23 hedge funds’ portfolios at the end of September. There were 18 hedge funds in our database with ALDR holdings at the end of the previous quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as AMN Healthcare Services, Inc. (NYSE:AHS), Vishay Intertechnology (NYSE:VSH), and Huron Consulting Group (NASDAQ:HURN) to gather more data points.
With all of this in mind, let’s take a look at the recent action encompassing Alder Biopharmaceuticals Inc (NASDAQ:ALDR).
What does the smart money think about Alder Biopharmaceuticals Inc (NASDAQ:ALDR)?
At the end of the third quarter, a total of 23 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 28% from the previous quarter. With the smart money’s positions undergoing their usual ebb and flow, there exists an “upper tier” of key hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Millennium Management, managed by Israel Englander, holds the largest position in Alder Biopharmaceuticals Inc (NASDAQ:ALDR). Millennium Management has a $49.3 million position in the stock, comprising 0.1% of its 13F portfolio. The second most bullish fund manager is Steve Cohen of Point72 Asset Management, with a $39 million position; the fund has 0.3% of its 13F portfolio invested in the stock. Other hedge funds and institutional investors with similar optimism contain Christopher James’s Partner Fund Management, Jerome Pfund and Michael Sjostrom’s Sectoral Asset Management and Bihua Chen’s Cormorant Asset Management.
As one would reasonably expect, key money managers have been driving this bullishness. Highbridge Capital Management, managed by Glenn Russell Dubin, established the most outsized position in Alder Biopharmaceuticals Inc (NASDAQ:ALDR). Highbridge Capital Management had $3.7 million invested in the company at the end of the quarter. Paul Marshall and Ian Wace’s Marshall Wace LLP also initiated a $3.5 million position during the quarter. The other funds with brand new ALDR positions are David Costen Haley’s HBK Investments, Lee Munder’s Lee Munder Capital Group, and Vishal Bhutani and Joshua Bederman’s Pyrrho Capital Management.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Alder Biopharmaceuticals Inc (NASDAQ:ALDR) but similarly valued. These stocks are AMN Healthcare Services, Inc. (NYSE:AHS), Vishay Intertechnology (NYSE:VSH), Huron Consulting Group (NASDAQ:HURN), and Pattern Energy Group Inc (NASDAQ:PEGI). This group of stocks’ market caps are similar to ALDR’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
As you can see these stocks had an average of 17.75 hedge funds with bullish positions and the average amount invested in these stocks was $158 million. That figure was $242 million in ALDR’s case. AMN Healthcare Services, Inc. (NYSE:AHS) is the most popular stock in this table. On the other hand Pattern Energy Group Inc (NASDAQ:PEGI) is the least popular one with only 13 bullish hedge fund positions. Alder Biopharmaceuticals Inc (NASDAQ:ALDR) is not the most popular stock in this group but hedge fund interest is still above average. This is a positive signal that makes ALDR worth a closer look.