Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the third quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 5 years and analyze what the smart money thinks of Allakos Inc. (NASDAQ:ALLK) based on that data.
Is ALLK a good stock to buy now? Money managers were in a bearish mood. The number of bullish hedge fund bets were cut by 5 recently. Allakos Inc. (NASDAQ:ALLK) was in 9 hedge funds’ portfolios at the end of September. The all time high for this statistics is 17. Our calculations also showed that ALLK 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.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 113% since March 2017 and outperformed the S&P 500 ETFs by more than 66 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
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. With all of this in mind let’s check out the latest hedge fund action regarding Allakos Inc. (NASDAQ:ALLK).
Do Hedge Funds Think ALLK Is A Good Stock To Buy Now?
At the end of September, a total of 9 of the hedge funds tracked by Insider Monkey were long this stock, a change of -36% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in ALLK 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.
The largest stake in Allakos Inc. (NASDAQ:ALLK) was held by Redmile Group, which reported holding $197.6 million worth of stock at the end of September. It was followed by Baker Bros. Advisors with a $56.9 million position. Other investors bullish on the company included Rock Springs Capital Management, Samsara BioCapital, and Cormorant Asset Management. In terms of the portfolio weights assigned to each position Samsara BioCapital allocated the biggest weight to Allakos Inc. (NASDAQ:ALLK), around 4.37% of its 13F portfolio. Redmile Group is also relatively very bullish on the stock, designating 3.63 percent of its 13F equity portfolio to ALLK.
Seeing as Allakos Inc. (NASDAQ:ALLK) has faced falling interest from hedge fund managers, logic holds that there lies a certain “tier” of fund managers that slashed their positions entirely heading into Q4. At the top of the heap, Noam Gottesman’s GLG Partners said goodbye to the largest stake of the “upper crust” of funds monitored by Insider Monkey, worth an estimated $4.9 million in stock, and Neil Shahrestani’s Ikarian Capital was right behind this move, as the fund cut about $3.1 million worth. These moves are important to note, as aggregate hedge fund interest fell by 5 funds heading into Q4.
Let’s check out hedge fund activity in other stocks similar to Allakos Inc. (NASDAQ:ALLK). We will take a look at Integra Lifesciences Holdings Corp (NASDAQ:IART), Allison Transmission Holdings Inc (NYSE:ALSN), Wright Medical Group N.V. (NASDAQ:WMGI), Medpace Holdings, Inc. (NASDAQ:MEDP), Healthequity Inc (NASDAQ:HQY), YETI Holdings, Inc. (NYSE:YETI), and Cirrus Logic, Inc. (NASDAQ:CRUS). All of these stocks’ market caps are similar to ALLK’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 28 hedge funds with bullish positions and the average amount invested in these stocks was $394 million. That figure was $306 million in ALLK’s case. Wright Medical Group N.V. (NASDAQ:WMGI) is the most popular stock in this table. On the other hand Integra Lifesciences Holdings Corp (NASDAQ:IART) is the least popular one with only 16 bullish hedge fund positions. Compared to these stocks Allakos Inc. (NASDAQ:ALLK) is even less popular than IART. Our overall hedge fund sentiment score for ALLK is 15.9. 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. Hedge funds clearly dropped the ball on ALLK as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. 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 still beat the market by 16.2 percentage points. A small number of hedge funds were also right about betting on ALLK as the stock returned 42.8% since Q3 (through December 8th) and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.