Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed in recent years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets hoping that they will outperform the broader market. Our research shows that certain hedge funds do have great stock picking skills (and we can identify these hedge funds in advance pretty accurately), so let’s take a glance at the smart money sentiment towards Akouos, Inc. (NASDAQ:AKUS).
Is AKUS a good stock to buy now? Akouos, Inc. (NASDAQ:AKUS) investors should be aware of a decrease in enthusiasm from smart money in recent months. Akouos, Inc. (NASDAQ:AKUS) was in 12 hedge funds’ portfolios at the end of September. The all time high for this statistics is 20. There were 20 hedge funds in our database with AKUS holdings at the end of June. Our calculations also showed that AKUS 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 market participants, hedge funds are viewed as underperforming, old financial vehicles of yesteryear. While there are greater than 8000 funds trading at present, Our researchers choose to focus on the elite of this group, approximately 850 funds. These hedge fund managers manage most of the smart money’s total capital, and by keeping track of their matchless picks, Insider Monkey has figured out various investment strategies that have historically defeated Mr. Market. Insider Monkey’s flagship short hedge fund strategy defeated the S&P 500 short ETFs by around 20 percentage points per year 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 15 best blue chip stocks 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. 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. Now we’re going to review the latest hedge fund action regarding Akouos, Inc. (NASDAQ:AKUS).
Do Hedge Funds Think AKUS Is A Good Stock To Buy Now?
At the end of September, a total of 12 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -40% from the second quarter of 2020. Below, you can check out the change in hedge fund sentiment towards AKUS over the last 21 quarters. With hedge funds’ capital changing hands, there exists a few notable hedge fund managers who were upping their holdings substantially (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, RA Capital Management, managed by Peter Kolchinsky, holds the most valuable position in Akouos, Inc. (NASDAQ:AKUS). RA Capital Management has a $52.2 million position in the stock, comprising 1% of its 13F portfolio. The second largest stake is held by EcoR1 Capital, managed by Oleg Nodelman, which holds a $45.2 million position; 3.2% of its 13F portfolio is allocated to the company. Some other members of the smart money that are bullish contain Ken Griffin’s Citadel Investment Group, Bihua Chen’s Cormorant Asset Management and Phill Gross and Robert Atchinson’s Adage Capital Management. In terms of the portfolio weights assigned to each position EcoR1 Capital allocated the biggest weight to Akouos, Inc. (NASDAQ:AKUS), around 3.22% of its 13F portfolio. RA Capital Management is also relatively very bullish on the stock, setting aside 0.95 percent of its 13F equity portfolio to AKUS.
Since Akouos, Inc. (NASDAQ:AKUS) has experienced declining sentiment from the smart money, logic holds that there exists a select few fund managers that elected to cut their full holdings heading into Q4. At the top of the heap, James E. Flynn’s Deerfield Management dumped the largest investment of the “upper crust” of funds watched by Insider Monkey, comprising an estimated $7.2 million in stock. Farallon Capital, also sold off its stock, about $5.1 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest fell by 8 funds heading into Q4.
Let’s now take a look at hedge fund activity in other stocks similar to Akouos, Inc. (NASDAQ:AKUS). We will take a look at Gogo Inc (NASDAQ:GOGO), World Acceptance Corp. (NASDAQ:WRLD), PAE Incorporated (NASDAQ:PAE), Douglas Dynamics Inc (NYSE:PLOW), Trean Insurance Group, Inc. (NASDAQ:TIG), Keros Therapeutics, Inc. (NASDAQ:KROS), and i3 Verticals, Inc. (NASDAQ:IIIV). This group of stocks’ market valuations are similar to AKUS’s market valuation.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
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As you can see these stocks had an average of 12.9 hedge funds with bullish positions and the average amount invested in these stocks was $107 million. That figure was $178 million in AKUS’s case. i3 Verticals, Inc. (NASDAQ:IIIV) is the most popular stock in this table. On the other hand Douglas Dynamics Inc (NYSE:PLOW) is the least popular one with only 7 bullish hedge fund positions. Akouos, Inc. (NASDAQ:AKUS) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for AKUS is 37.7. 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 32.9% in 2020 through December 8th and surpassed the market again by 16.2 percentage points. Unfortunately AKUS wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); AKUS investors were disappointed as the stock returned -13% since the end of September (through 12/8) 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.
Disclosure: None. This article was originally published at Insider Monkey.