Were Hedge Funds Right About Fulcrum Therapeutics, Inc. (FULC)?

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 fourth quarter of 2019. A significant number of hedge funds continued their strong performance in 2020 and 2021 as well. 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 Fulcrum Therapeutics, Inc. (NASDAQ:FULC).

Hedge fund interest in Fulcrum Therapeutics, Inc. (NASDAQ:FULC) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that FULC isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings). At the end of this article we will also compare FULC to other stocks including ASA Gold and Precious Metals Ltd (NYSE:ASA), Lava Therapeutics B.V. (NASDAQ:LVTX), and Takung Art Co., Ltd. (NYSE:TKAT) to get a better sense of its popularity.

So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 115 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, pet market is growing at a 7% annual rate and is expected to reach $110 billion in 2021. So, we are checking out the 5 best stocks for animal lovers. We go through lists like the 15 best Jim Cramer stocks to identify the next Tesla that will deliver outsized returns. 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 homepage. Keeping this in mind we’re going to go over the recent hedge fund action regarding Fulcrum Therapeutics, Inc. (NASDAQ:FULC).

Do Hedge Funds Think FULC Is A Good Stock To Buy Now?

At the end of March, a total of 17 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in FULC over the last 23 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in Fulcrum Therapeutics, Inc. (NASDAQ:FULC) was held by Suvretta Capital Management, which reported holding $18 million worth of stock at the end of December. It was followed by Casdin Capital with a $14.6 million position. Other investors bullish on the company included Driehaus Capital, Acuta Capital Partners, and Millennium Management. In terms of the portfolio weights assigned to each position Burrage Capital Management allocated the biggest weight to Fulcrum Therapeutics, Inc. (NASDAQ:FULC), around 3.05% of its 13F portfolio. Acuta Capital Partners is also relatively very bullish on the stock, setting aside 2.64 percent of its 13F equity portfolio to FULC.

Because Fulcrum Therapeutics, Inc. (NASDAQ:FULC) has experienced bearish sentiment from the smart money, we can see that there exists a select few money managers that slashed their entire stakes last quarter. At the top of the heap, Anand Parekh’s Alyeska Investment Group sold off the biggest position of the 750 funds monitored by Insider Monkey, valued at an estimated $5.3 million in stock. Srini Akkaraju and Michael Dybbs’s fund, Samsara BioCapital, also said goodbye to its stock, about $3.4 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s check out hedge fund activity in other stocks similar to Fulcrum Therapeutics, Inc. (NASDAQ:FULC). These stocks are ASA Gold and Precious Metals Ltd (NYSE:ASA), Lava Therapeutics B.V. (NASDAQ:LVTX), Takung Art Co., Ltd. (NYSE:TKAT), Spirit of Texas Bancshares, Inc. (NASDAQ:STXB), Citizens & Northern Corporation (NASDAQ:CZNC), CapStar Financial Holdings, Inc. (NASDAQ:CSTR), and Aurora Mobile Limited (NASDAQ:JG). This group of stocks’ market values match FULC’s market value.

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As you can see these stocks had an average of 7 hedge funds with bullish positions and the average amount invested in these stocks was $18 million. That figure was $86 million in FULC’s case. Lava Therapeutics B.V. (NASDAQ:LVTX) is the most popular stock in this table. On the other hand Takung Art Co., Ltd. (NYSE:TKAT) is the least popular one with only 1 bullish hedge fund positions. Compared to these stocks Fulcrum Therapeutics, Inc. (NASDAQ:FULC) is more popular among hedge funds. Our overall hedge fund sentiment score for FULC is 85. 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. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 28.5% in 2021 through July 23rd and still beat the market by 10.1 percentage points. Unfortunately FULC wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on FULC were disappointed as the stock returned -32.1% since the end of the first quarter (through 7/23) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market since 2019.

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Disclosure: None. This article was originally published at Insider Monkey.