“The global economic environment is very favorable for investors. Economies are generally strong, but not too strong. Employment levels are among the strongest for many decades. Interest rates are paused at very low levels, and the risk of significant increases in the medium term seems low. Financing for transactions is freely available to good borrowers, but not in major excess. Covenants are lighter than they were five years ago, but the extreme excesses seen in the past do not seem prevalent yet today. Despite this apparent ‘goldilocks’ market environment, we continue to worry about a world where politics are polarized almost everywhere, interest rates are low globally, and equity valuations are at their peak,” are the words of Brookfield Asset Management. Brookfield was right about politics as stocks experienced their second worst May since the 1960s due to escalation of trade disputes. We pay attention to what hedge funds are doing in a particular stock before considering a potential investment because it works for us. So let’s take a glance at the smart money sentiment towards Acorda Therapeutics Inc (NASDAQ:ACOR) and see how it was affected.
Hedge fund interest in Acorda Therapeutics Inc (NASDAQ:ACOR) shares was flat at the end of last quarter. This is usually a negative indicator. 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 Clean Energy Fuels Corp (NASDAQ:CLNE), i3 Verticals, Inc. (NASDAQ:IIIV), and IRSA Inversiones y Representaciones Sociedad Anónima (NYSE:IRS) to gather more data points.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (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 30.9% through May 30, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Paul Marshall of Marshall Wace
We’re going to check out the latest hedge fund action surrounding Acorda Therapeutics Inc (NASDAQ:ACOR).
How have hedgies been trading Acorda Therapeutics Inc (NASDAQ:ACOR)?
At the end of the first quarter, a total of 22 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the fourth quarter of 2018. By comparison, 18 hedge funds held shares or bullish call options in ACOR 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.
The largest stake in Acorda Therapeutics Inc (NASDAQ:ACOR) was held by Scopia Capital, which reported holding $59.3 million worth of stock at the end of March. It was followed by Renaissance Technologies with a $53.3 million position. Other investors bullish on the company included Marshall Wace LLP, GLG Partners, and Citadel Investment Group.
Since Acorda Therapeutics Inc (NASDAQ:ACOR) has witnessed bearish sentiment from the aggregate hedge fund industry, logic holds that there lies a certain “tier” of fund managers that slashed their positions entirely heading into Q3. At the top of the heap, Christopher James’s Partner Fund Management dumped the biggest investment of the 700 funds watched by Insider Monkey, comprising close to $27.1 million in stock. Christopher James’s fund, Partner Fund Management, also sold off its stock, about $17.3 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Acorda Therapeutics Inc (NASDAQ:ACOR) but similarly valued. These stocks are Clean Energy Fuels Corp (NASDAQ:CLNE), i3 Verticals, Inc. (NASDAQ:IIIV), IRSA Inversiones y Representaciones Sociedad Anónima (NYSE:IRS), and Gladstone Commercial Corporation (NASDAQ:GOOD). This group of stocks’ market values match ACOR’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CLNE | 11 | 32009 | 3 |
| IIIV | 8 | 66259 | 0 |
| IRS | 8 | 48594 | 1 |
| GOOD | 6 | 61639 | -1 |
| Average | 8.25 | 52125 | 0.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 8.25 hedge funds with bullish positions and the average amount invested in these stocks was $52 million. That figure was $161 million in ACOR’s case. Clean Energy Fuels Corp (NASDAQ:CLNE) is the most popular stock in this table. On the other hand Gladstone Commercial Corporation (NASDAQ:GOOD) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks Acorda Therapeutics Inc (NASDAQ:ACOR) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Unfortunately ACOR wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on ACOR were disappointed as the stock returned -29.4% during the same period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 13 of these stocks already outperformed the market in Q2.
Disclosure: None. This article was originally published at Insider Monkey.
