At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Aclaris Therapeutics, Inc. (NASDAQ:ACRS).
Aclaris Therapeutics, Inc. (NASDAQ:ACRS) investors should pay attention to a decrease in hedge fund sentiment recently. ACRS was in 15 hedge funds’ portfolios at the end of March. There were 17 hedge funds in our database with ACRS holdings at the end of the previous quarter. Our calculations also showed that ACRS 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.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 58 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, We take a look at lists like the 10 stocks that went up during the 2008 crash to identify the companies that are likely to deliver double digit returns in up and down markets. 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 we’re going to take a peek at the key hedge fund action regarding Aclaris Therapeutics, Inc. (NASDAQ:ACRS).
What does smart money think about Aclaris Therapeutics, Inc. (NASDAQ:ACRS)?
Heading into the second quarter of 2020, a total of 15 of the hedge funds tracked by Insider Monkey were long this stock, a change of -12% from one quarter earlier. By comparison, 16 hedge funds held shares or bullish call options in ACRS a year ago. With hedgies’ capital changing hands, there exists an “upper tier” of key hedge fund managers who were upping their holdings meaningfully (or already accumulated large positions).
Among these funds, MFN Partners held the most valuable stake in Aclaris Therapeutics, Inc. (NASDAQ:ACRS), which was worth $4.2 million at the end of the third quarter. On the second spot was Renaissance Technologies which amassed $3.3 million worth of shares. Endurant Capital Management, Samsara BioCapital, and EcoR1 Capital 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 Samsara BioCapital allocated the biggest weight to Aclaris Therapeutics, Inc. (NASDAQ:ACRS), around 1.56% of its 13F portfolio. Endurant Capital Management is also relatively very bullish on the stock, designating 1.23 percent of its 13F equity portfolio to ACRS.
Because Aclaris Therapeutics, Inc. (NASDAQ:ACRS) has witnessed declining sentiment from the entirety of the hedge funds we track, it’s easy to see that there was a specific group of money managers who sold off their entire stakes by the end of the first quarter. It’s worth mentioning that Kevin Kotler’s Broadfin Capital dumped the largest stake of all the hedgies watched by Insider Monkey, totaling close to $3.6 million in stock. Israel Englander’s fund, Millennium Management, also sold off its stock, about $0.5 million worth. These transactions are interesting, as total hedge fund interest dropped by 2 funds by the end of the first quarter.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Aclaris Therapeutics, Inc. (NASDAQ:ACRS) but similarly valued. We will take a look at Atlantic American Corporation (NASDAQ:AAME), Espey Manufacturing & Electronics Corp. (NYSE:ESP), Natural Alternatives International, Inc. (NASDAQ:NAII), and Party City Holdco Inc (NYSE:PRTY). This group of stocks’ market caps resemble ACRS’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 3.25 hedge funds with bullish positions and the average amount invested in these stocks was $4 million. That figure was $23 million in ACRS’s case. Party City Holdco Inc (NYSE:PRTY) is the most popular stock in this table. On the other hand Atlantic American Corporation (NASDAQ:AAME) is the least popular one with only 1 bullish hedge fund positions. Compared to these stocks Aclaris Therapeutics, Inc. (NASDAQ:ACRS) 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 13.3% in 2020 through June 25th but still managed to beat the market by 16.8 percentage points. Hedge funds were also right about betting on ACRS as the stock returned 46.2% so far in Q2 (through June 25th) 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.
Disclosure: None. This article was originally published at Insider Monkey.