In this article we will check out the progression of hedge fund sentiment towards Ascendis Pharma A/S (NASDAQ:ASND) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.
Is Ascendis Pharma A/S (NASDAQ:ASND) the right pick for your portfolio? Prominent investors are taking a bearish view. The number of bullish hedge fund bets were cut by 5 recently. Our calculations also showed that ASND isn’t among the 30 most popular stocks among hedge funds (click for Q1 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 87% since March 2017 and outperformed the S&P 500 ETFs by more than 51 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 leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out trades like this one. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now we’re going to take a look at the latest hedge fund action encompassing Ascendis Pharma A/S (NASDAQ:ASND).
What does smart money think about Ascendis Pharma A/S (NASDAQ:ASND)?
At the end of the first quarter, a total of 33 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -13% from one quarter earlier. On the other hand, there were a total of 35 hedge funds with a bullish position in ASND a year ago. With hedge funds’ positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were upping their holdings considerably (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, Peter Kolchinsky’s RA Capital Management has the biggest position in Ascendis Pharma A/S (NASDAQ:ASND), worth close to $553.5 million, comprising 17.5% of its total 13F portfolio. Sitting at the No. 2 spot is Baker Bros. Advisors, led by Julian Baker and Felix Baker, holding a $381.8 million position; the fund has 2.4% of its 13F portfolio invested in the stock. Remaining members of the smart money that are bullish encompass Samuel Isaly’s OrbiMed Advisors, Albert Cha and Frank Kung’s Vivo Capital and Behzad Aghazadeh’s Avoro Capital Advisors (venBio Select Advisor). In terms of the portfolio weights assigned to each position Vivo Capital allocated the biggest weight to Ascendis Pharma A/S (NASDAQ:ASND), around 20.43% of its 13F portfolio. RA Capital Management is also relatively very bullish on the stock, designating 17.48 percent of its 13F equity portfolio to ASND.
Seeing as Ascendis Pharma A/S (NASDAQ:ASND) has experienced a decline in interest from the aggregate hedge fund industry, logic holds that there was a specific group of fund managers that decided to sell off their entire stakes by the end of the third quarter. Interestingly, Michel Massoud’s Melqart Asset Management said goodbye to the biggest stake of all the hedgies followed by Insider Monkey, valued at an estimated $16.1 million in stock. Michael Rockefeller and KarláKroeker’s fund, Woodline Partners, also said goodbye to its stock, about $7.7 million worth. These transactions are interesting, as aggregate hedge fund interest was cut by 5 funds by the end of the third quarter.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Ascendis Pharma A/S (NASDAQ:ASND) but similarly valued. We will take a look at Douglas Emmett, Inc. (NYSE:DEI), China Southern Airlines Co Ltd (NYSE:ZNH), James Hardie Industries plc (NYSE:JHX), and News Corp (NASDAQ:NWS). This group of stocks’ market caps are closest to ASND’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 10.25 hedge funds with bullish positions and the average amount invested in these stocks was $142 million. That figure was $2201 million in ASND’s case. Douglas Emmett, Inc. (NYSE:DEI) is the most popular stock in this table. On the other hand China Southern Airlines Co Ltd (NYSE:ZNH) is the least popular one with only 2 bullish hedge fund positions. Compared to these stocks Ascendis Pharma A/S (NASDAQ:ASND) is more popular among hedge funds. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks returned 8.3% in 2020 through the end of May but still managed to beat the market by 13.2 percentage points. Hedge funds were also right about betting on ASND as the stock returned 29.2% so far in Q2 (through the end of May) 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.