Many investors, including Carl Icahn 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 third quarter, many investors lost money due to unpredictable events such as the concerns over Valeant’s drug pricing policy that led to an overall drop among pharma stocks. 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 Kindred Biosciences Inc (NASDAQ:KIN) changed recently.
Is Kindred Biosciences Inc undervalued? Money managers are in a bearish mood. The number of bullish hedge fund positions was trimmed by 2 recently. KIN was in 12 hedge funds’ portfolios at the end of September. There were 14 hedge funds in our database with KIN positions at the end of the previous quarter. At the end of this article we will also compare KIN to other stocks, including Turtle Beach Corp (NASDAQ:HEAR), AxoGen, Inc. (NASDAQ:AXGN), and Intevac, Inc. (NASDAQ:IVAC) to get a better sense of its popularity.
According to most market participants, hedge funds are assumed to be unimportant, outdated investment tools of the past. While there are greater than 8000 funds with their doors open today, Our researchers choose to focus on the masters of this group, around 700 funds. Most estimates calculate that this group of people command the majority of the hedge fund industry’s total capital, and by following their inimitable investments, Insider Monkey has uncovered numerous investment strategies that have historically outrun Mr. Market. Insider Monkey’s small-cap hedge fund strategy beat the S&P 500 index by 12 percentage points annually for a decade in their back tests.
Keeping this in mind, we’re going to go over the new action surrounding Kindred Biosciences Inc (NASDAQ:KIN).
How are hedge funds trading Kindred Biosciences Inc (NASDAQ:KIN)?
At the end of the third quarter, a total of 12 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -14% from the second quarter. With hedgies’ capital changing hands, there exists an “upper tier” of key hedge fund managers who were boosting their holdings significantly (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, Baupost Group, managed by Seth Klarman, holds the number one position in Kindred Biosciences Inc (NASDAQ:KIN). Baupost Group has a $15.7 million position in the stock, comprising 0.3% of its 13F portfolio. The second most bullish fund manager is EcoR1 Capital, managed by Oleg Nodelman, which holds a $6.9 million position; 3.1% of its 13F portfolio is allocated to the company. Some other members of the smart money with similar optimism include Alex Denner’s Sarissa Capital Management, Howard Guberman’ Gruss Asset Management and Bihua Chen’s Cormorant Asset Management.
Due to the fact that Kindred Biosciences Inc (NASDAQ:KIN) has witnessed falling interest from the entirety of the hedge funds we track, we can see that there was a specific group of hedge funds that decided to sell off their full holdings by the end of the third quarter. At the top of the heap, Ken Greenberg and David Kim’s Ghost Tree Capital cut the largest position of all the hedgies followed by Insider Monkey, valued at an estimated $0.6 million in stock. Chao Ku’s fund, Nine Chapters Capital Management, also said goodbye to its stock, about $0.1 million worth. These bearish behaviors are interesting, as total hedge fund interest dropped by 2 funds by the end of the third quarter.
Let’s check out hedge fund activity in other stocks similar to Kindred Biosciences Inc (NASDAQ:KIN). These stocks are Turtle Beach Corp (NASDAQ:HEAR), AxoGen, Inc. (NASDAQ:AXGN), Intevac, Inc. (NASDAQ:IVAC), and SCYNEXIS Inc (NASDAQ:SCYX). This group of stocks’ market values match KIN’s market value.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
As you can see these stocks had an average of 6 hedge funds with bullish positions and the average amount invested in these stocks was $22 million, lower than the $44 million in KIN’s case. SCYNEXIS Inc (NASDAQ:SCYX) is the most popular stock in this table with a total of nine funds reporting long positions. On the other hand Turtle Beach Corp (NASDAQ:HEAR) is the least popular one. Compared to these stocks Kindred Biosciences Inc (NASDAQ:KIN) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.