How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding Adicet Bio Inc. (NASDAQ:ACET).
Is ACET a good stock to buy now? Money managers were betting on the stock. The number of long hedge fund positions advanced by 7 lately. Adicet Bio Inc. (NASDAQ:ACET) was in 7 hedge funds’ portfolios at the end of the third quarter of 2020. Our calculations also showed that ACET isn’t among the 30 most popular stocks among hedge funds (click for Q3 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.
If you’d ask most investors, hedge funds are perceived as underperforming, old financial tools of yesteryear. While there are over 8000 funds trading today, We look at the moguls of this group, about 850 funds. These investment experts control most of the hedge fund industry’s total asset base, and by keeping track of their best stock picks, Insider Monkey has identified numerous investment strategies that have historically outstripped the market. Insider Monkey’s flagship short hedge fund strategy outstripped the S&P 500 short ETFs by around 20 percentage points annually since its inception in March 2017. Our portfolio of short stocks lost 13% since February 2017 (through November 17th) even though the market was up 65% during the same period. We just shared a list of 6 short targets in our latest quarterly update .
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 5 best cheap stocks to buy according to Ray Dalio to identify stocks with upside potential. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Keeping this in mind we’re going to view the fresh hedge fund action encompassing Adicet Bio Inc. (NASDAQ:ACET).
How are hedge funds trading Adicet Bio Inc. (NASDAQ:ACET)?
At third quarter’s end, a total of 7 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 7 from the previous quarter. The graph below displays the number of hedge funds with bullish position in ACET over the last 21 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to Insider Monkey’s hedge fund database, OrbiMed Advisors, holds the number one position in Adicet Bio Inc. (NASDAQ:ACET). OrbiMed Advisors has a $79.8 million position in the stock, comprising 1% of its 13F portfolio. On OrbiMed Advisors’s heels is Nantahala Capital Management, led by Wilmot B. Harkey and Daniel Mack, holding a $4.9 million position; 0.2% of its 13F portfolio is allocated to the stock. Other hedge funds and institutional investors that hold long positions comprise Neil Shahrestani’s Ikarian Capital, Nathan Fischel’s DAFNA Capital Management and John Overdeck and David Siegel’s Two Sigma Advisors. In terms of the portfolio weights assigned to each position OrbiMed Advisors allocated the biggest weight to Adicet Bio Inc. (NASDAQ:ACET), around 1.01% of its 13F portfolio. AWH Capital is also relatively very bullish on the stock, earmarking 0.5 percent of its 13F equity portfolio to ACET.
As one would reasonably expect, some big names were leading the bulls’ herd. OrbiMed Advisors, assembled the largest position in Adicet Bio Inc. (NASDAQ:ACET). OrbiMed Advisors had $79.8 million invested in the company at the end of the quarter. Wilmot B. Harkey and Daniel Mack’s Nantahala Capital Management also made a $4.9 million investment in the stock during the quarter. The other funds with new positions in the stock are Neil Shahrestani’s Ikarian Capital, Nathan Fischel’s DAFNA Capital Management, and John Overdeck and David Siegel’s Two Sigma Advisors.
Let’s now take a look at hedge fund activity in other stocks similar to Adicet Bio Inc. (NASDAQ:ACET). We will take a look at MediciNova, Inc. (NASDAQ:MNOV), Silicom Ltd. (NASDAQ:SILC), Metropolitan Bank Holding Corp. (NYSE:MCB), Orion Energy Systems, Inc. (NASDAQ:OESX), The ExOne Company (NASDAQ:XONE), Summit Therapeutics Inc. (NASDAQ:SMMT), and Hometrust Bancshares Inc (NASDAQ:HTBI). This group of stocks’ market caps are closest to ACET’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 5.9 hedge funds with bullish positions and the average amount invested in these stocks was $17 million. That figure was $90 million in ACET’s case. Hometrust Bancshares Inc (NASDAQ:HTBI) is the most popular stock in this table. On the other hand Summit Therapeutics Inc. (NASDAQ:SMMT) is the least popular one with only 1 bullish hedge fund positions. Adicet Bio Inc. (NASDAQ:ACET) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for ACET is 58. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 31.6% in 2020 through December 2nd and beat the market again by 16 percentage points. Unfortunately ACET wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on ACET were disappointed as the stock returned 1.3% since the end of September (through 12/2) 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 many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.