Is Aileron Therapeutics, Inc. (ALRN) A Good Stock To Buy?

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 have processed the filings of the more than 817 world-class investment firms that we track and now have access to the collective wisdom contained in these filings, which are based on their September 30 holdings, data that is available nowhere else. Should you consider Aileron Therapeutics, Inc. (NASDAQ:ALRN) for your portfolio? We’ll look to this invaluable collective wisdom for the answer.

Aileron Therapeutics, Inc. (NASDAQ:ALRN) has experienced an increase in hedge fund interest lately. Aileron Therapeutics, Inc. (NASDAQ:ALRN) was in 4 hedge funds’ portfolios at the end of September. The all time high for this statistics is 9. There were 2 hedge funds in our database with ALRN positions at the end of the second quarter. Our calculations also showed that ALRN 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.

At the moment there are a multitude of indicators investors have at their disposal to appraise publicly traded companies. Two of the most under-the-radar indicators are hedge fund and insider trading moves. We have shown that, historically, those who follow the top picks of the elite fund managers can outclass the broader indices by a significant margin (see the details here).


Israel Englander of Millennium Management

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 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. Now we’re going to review the latest hedge fund action regarding Aileron Therapeutics, Inc. (NASDAQ:ALRN).

What have hedge funds been doing with Aileron Therapeutics, Inc. (NASDAQ:ALRN)?

At third quarter’s end, a total of 4 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 100% from one quarter earlier. On the other hand, there were a total of 5 hedge funds with a bullish position in ALRN a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Of the funds tracked by Insider Monkey, Renaissance Technologies has the most valuable position in Aileron Therapeutics, Inc. (NASDAQ:ALRN), worth close to $1.6 million, amounting to less than 0.1%% of its total 13F portfolio. The second most bullish fund manager is Endurant Capital Management, managed by Vishal Saluja and Pham Quang, which holds a $0.3 million position; 0.1% of its 13F portfolio is allocated to the stock. Remaining professional money managers that hold long positions consist of Ken Griffin’s Citadel Investment Group, Israel Englander’s Millennium Management and . In terms of the portfolio weights assigned to each position Endurant Capital Management allocated the biggest weight to Aileron Therapeutics, Inc. (NASDAQ:ALRN), around 0.1% of its 13F portfolio. Renaissance Technologies is also relatively very bullish on the stock, earmarking 0.0016 percent of its 13F equity portfolio to ALRN.

As aggregate interest increased, key hedge funds were breaking ground themselves. Endurant Capital Management, managed by Vishal Saluja and Pham Quang, created the biggest position in Aileron Therapeutics, Inc. (NASDAQ:ALRN). Endurant Capital Management had $0.3 million invested in the company at the end of the quarter. Ken Griffin’s Citadel Investment Group also made a $0.1 million investment in the stock during the quarter. The only other fund with a brand new ALRN position is Israel Englander’s Millennium Management.

Let’s go over hedge fund activity in other stocks similar to Aileron Therapeutics, Inc. (NASDAQ:ALRN). We will take a look at Performant Financial Corp (NASDAQ:PFMT), Dover Motorsports, Inc. (NYSE:DVD), Jerash Holdings (US), Inc. (NASDAQ:JRSH), Sonim Technologies, Inc. (NASDAQ:SONM), Baudax Bio, Inc. (NASDAQ:BXRX), Atlas Technical Consultants, Inc. (NASDAQ:ATCX), and Trxade Group, Inc. (NASDAQ:MEDS). This group of stocks’ market caps are closest to ALRN’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
PFMT 2 12771 -1
DVD 3 4612 -1
JRSH 3 927 0
SONM 6 4971 -5
BXRX 7 5134 -3
ATCX 9 10487 -1
MEDS 2 3855 0
Average 4.6 6108 -1.6

View table here if you experience formatting issues.

As you can see these stocks had an average of 4.6 hedge funds with bullish positions and the average amount invested in these stocks was $6 million. That figure was $2 million in ALRN’s case. Atlas Technical Consultants, Inc. (NASDAQ:ATCX) is the most popular stock in this table. On the other hand Performant Financial Corp (NASDAQ:PFMT) is the least popular one with only 2 bullish hedge fund positions. Aileron Therapeutics, Inc. (NASDAQ:ALRN) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for ALRN is 34.6. 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 negative signal and 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 30.7% in 2020 through November 27th and surpassed the market again by 16.1 percentage points. Unfortunately ALRN wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); ALRN investors were disappointed as the stock returned -15.5% since the end of September (through 11/27) 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 most of these stocks already outperformed the market in 2020.

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