Many investors, including Paul Tudor Jones or Stan Druckenmiller, have been saying for a while now that the current market is overvalued due to a low interest rate environment that leads to companies swapping their equity for debt and focusing mostly on short-term performance such as beating the quarterly earnings estimates. In the fourth quarter, many investors lost money due to unpredictable events such as the sudden increase in long-term interest rates and unintended consequences of the trade war with China. Nevertheless, many of the stocks that tanked in the third quarter still sport strong fundamentals and their decline was more related to the general market sentiment rather than their individual performance and hedge funds kept their bullish stance. In this article we will find out how hedge fund sentiment to Homology Medicines, Inc. (NASDAQ:FIXX) changed recently.
Homology Medicines, Inc. (NASDAQ:FIXX) has seen a decrease in support from the world’s most elite money managers recently. Our calculations also showed that FIXX isn’t among the 30 most popular stocks among hedge funds.
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 flagship best performing hedge funds strategy returned 6.3% year to date (through December 3rd) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 18 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
We’re going to analyze the key hedge fund action surrounding Homology Medicines, Inc. (NASDAQ:FIXX).
Hedge fund activity in Homology Medicines, Inc. (NASDAQ:FIXX)
Heading into the fourth quarter of 2018, a total of 6 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -14% from the previous quarter. The graph below displays the number of hedge funds with bullish position in FIXX over the last 13 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, James E. Flynn’s Deerfield Management has the number one position in Homology Medicines, Inc. (NASDAQ:FIXX), worth close to $119.5 million, comprising 4.3% of its total 13F portfolio. Sitting at the No. 2 spot is Rock Springs Capital Management, managed by Kris Jenner, Gordon Bussard, Graham McPhail, which holds a $10.7 million position; the fund has 0.4% of its 13F portfolio invested in the stock. Remaining members of the smart money with similar optimism contain Eli Casdin’s Casdin Capital, Lee Ainslie’s Maverick Capital and Jerome Pfund and Michael Sjostrom’s Sectoral Asset Management.
Since Homology Medicines, Inc. (NASDAQ:FIXX) has faced bearish sentiment from the smart money, it’s easy to see that there exists a select few hedgies who sold off their entire stakes in the third quarter. At the top of the heap, Anand Parekh’s Alyeska Investment Group sold off the biggest investment of the 700 funds monitored by Insider Monkey, worth an estimated $2 million in stock. Ken Griffin’s fund, Citadel Investment Group, also cut its stock, about $0.3 million worth. These moves are intriguing to say the least, as total hedge fund interest fell by 1 funds in the third quarter.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Homology Medicines, Inc. (NASDAQ:FIXX) but similarly valued. These stocks are Social Capital Hedosophia Holdings Corp. (NYSE:IPOA), Carolina Financial Corporation (NASDAQ:CARO), The Manitowoc Company, Inc. (NYSE:MTW), and ORBCOMM Inc (NASDAQ:ORBC). This group of stocks’ market caps are closest to FIXX’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| IPOA | 23 | 297371 | -2 |
| CARO | 6 | 46311 | -1 |
| MTW | 21 | 204427 | 0 |
| ORBC | 15 | 129651 | 0 |
| Average | 16.25 | 169440 | -0.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 16.25 hedge funds with bullish positions and the average amount invested in these stocks was $169 million. That figure was $146 million in FIXX’s case. Social Capital Hedosophia Holdings Corp. (NYSE:IPOA) is the most popular stock in this table. On the other hand Carolina Financial Corporation (NASDAQ:CARO) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks Homology Medicines, Inc. (NASDAQ:FIXX) is even less popular than CARO. Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case more research is warranted.
Disclosure: None. This article was originally published at Insider Monkey.
