As we already know from media reports and hedge fund investor letters, hedge funds delivered their best returns in a decade. Most investors who decided to stick with hedge funds after a rough 2018 recouped their losses by the end of the third quarter. We get to see hedge funds’ thoughts towards the market and individual stocks by aggregating their quarterly portfolio movements and reading their investor letters. In this article, we will particularly take a look at what hedge funds think about Liquidia Technologies, Inc. (NASDAQ:LQDA).
Hedge fund interest in Liquidia Technologies, Inc. (NASDAQ:LQDA) shares was flat at the end of last quarter. This is usually a negative indicator. At the end of this article we will also compare LQDA to other stocks including United Bancshares Inc. OH (NASDAQ:UBOH), Aware, Inc. (NASDAQ:AWRE), and Cocrystal Pharma, Inc. (NASDAQ:COCP) to get a better sense of its popularity.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Israel Englander of Millennium Management
We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius’ weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock already gained 20 percent. Keeping this in mind we’re going to take a look at the key hedge fund action encompassing Liquidia Technologies, Inc. (NASDAQ:LQDA).
Hedge fund activity in Liquidia Technologies, Inc. (NASDAQ:LQDA)
At the end of the third quarter, a total of 6 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards LQDA over the last 17 quarters. With hedgies’ capital changing hands, there exists a few noteworthy hedge fund managers who were adding to their stakes significantly (or already accumulated large positions).
More specifically, Millennium Management was the largest shareholder of Liquidia Technologies, Inc. (NASDAQ:LQDA), with a stake worth $3.4 million reported as of the end of September. Trailing Millennium Management was Endurant Capital Management, which amassed a stake valued at $1.1 million. Samsara BioCapital, Alyeska Investment Group, and Citadel Investment Group were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Samsara BioCapital allocated the biggest weight to Liquidia Technologies, Inc. (NASDAQ:LQDA), around 0.37% of its 13F portfolio. Endurant Capital Management is also relatively very bullish on the stock, setting aside 0.34 percent of its 13F equity portfolio to LQDA.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Sculptor Capital. One hedge fund selling its entire position doesn’t always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don’t think this is the case in this case because only one of the 800+ hedge funds tracked by Insider Monkey identified as a viable investment and initiated a position in the stock (that fund was Renaissance Technologies).
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Liquidia Technologies, Inc. (NASDAQ:LQDA) but similarly valued. We will take a look at United Bancshares Inc. OH (NASDAQ:UBOH), Aware, Inc. (NASDAQ:AWRE), Cocrystal Pharma, Inc. (NASDAQ:COCP), and electroCore, Inc. (NASDAQ:ECOR). This group of stocks’ market caps are similar to LQDA’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| UBOH | 1 | 5843 | 0 |
| AWRE | 2 | 2665 | -1 |
| COCP | 2 | 48 | 1 |
| ECOR | 3 | 551 | 0 |
| Average | 2 | 2277 | 0 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 2 hedge funds with bullish positions and the average amount invested in these stocks was $2 million. That figure was $6 million in LQDA’s case. electroCore, Inc. (NASDAQ:ECOR) is the most popular stock in this table. On the other hand United Bancshares Inc. OH (NASDAQ:UBOH) is the least popular one with only 1 bullish hedge fund positions. Compared to these stocks Liquidia Technologies, Inc. (NASDAQ:LQDA) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Hedge funds were also right about betting on LQDA as the stock returned 22.2% during the first two months of Q4 and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
Disclosure: None. This article was originally published at Insider Monkey.
