Here is What Hedge Funds Think About Freeline Therapeutics Holdings plc (FRLN)
Asma UL Husna
6 min read
In this article we will take a look at whether hedge funds think Freeline Therapeutics Holdings plc (NASDAQ:FRLN) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.
Is Freeline Therapeutics Holdings plc (NASDAQ:FRLN) a healthy stock for your portfolio? Hedge funds were selling. The number of long hedge fund bets dropped by 1 recently. Freeline Therapeutics Holdings plc (NASDAQ:FRLN) was in 5 hedge funds' portfolios at the end of March. The all time high for this statistic is 9. Our calculations also showed that FRLN isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings). There were 6 hedge funds in our database with FRLN positions at the end of the fourth quarter.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 115 percentage points since March 2017 (see the details here). That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
MILLENNIUM MANAGEMENT
Israel Englander of Millennium Management
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, an activist hedge fund owns nearly 40% of this $23 biotech stock and is trying to buy the rest for around $50. So, we recommended a long position to our monthly premium newsletter subscribers. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. 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 let's analyze the recent hedge fund action regarding Freeline Therapeutics Holdings plc (NASDAQ:FRLN).
Do Hedge Funds Think FRLN Is A Good Stock To Buy Now?
At Q1's end, a total of 5 of the hedge funds tracked by Insider Monkey were long this stock, a change of -17% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in FRLN over the last 23 quarters. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Freeline Therapeutics Holdings plc (NASDAQ:FRLN) was held by Sectoral Asset Management, which reported holding $8.1 million worth of stock at the end of December. It was followed by Frazier Healthcare Partners with a $6.8 million position. Other investors bullish on the company included Millennium Management, Alyeska Investment Group, and Woodline Partners. In terms of the portfolio weights assigned to each position Sectoral Asset Management allocated the biggest weight to Freeline Therapeutics Holdings plc (NASDAQ:FRLN), around 0.61% of its 13F portfolio. Frazier Healthcare Partners is also relatively very bullish on the stock, designating 0.54 percent of its 13F equity portfolio to FRLN.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Ovata Capital Management. 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 none of the 750+ hedge funds tracked by Insider Monkey identified FRLN as a viable investment and initiated a position in the stock.
Let's now review hedge fund activity in other stocks similar to Freeline Therapeutics Holdings plc (NASDAQ:FRLN). We will take a look at Verastem Inc (NASDAQ:VSTM), Genco Shipping & Trading Limited (NYSE:GNK), Metropolitan Bank Holding Corp. (NYSE:MCB), Vishay Precision Group Inc (NYSE:VPG), Hall of Fame Resort & Entertainment Company (NASDAQ:HOFV), Sientra Inc (NASDAQ:SIEN), and Concrete Pumping Holdings, Inc. (NASDAQ:BBCP). This group of stocks' market valuations are similar to FRLN's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position VSTM,12,129712,-3 GNK,22,121117,7 MCB,10,91521,2 VPG,15,87977,0 HOFV,6,12745,-1 SIEN,21,90459,6 BBCP,14,60722,4 Average,14.3,84893,2.1 [/table]
As you can see these stocks had an average of 14.3 hedge funds with bullish positions and the average amount invested in these stocks was $85 million. That figure was $17 million in FRLN's case. Genco Shipping & Trading Limited (NYSE:GNK) is the most popular stock in this table. On the other hand Hall of Fame Resort & Entertainment Company (NASDAQ:HOFV) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks Freeline Therapeutics Holdings plc (NASDAQ:FRLN) is even less popular than HOFV. Our overall hedge fund sentiment score for FRLN is 20.7. 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. Hedge funds dodged a bullet by taking a bearish stance towards FRLN. Our calculations showed that the top 10 most popular hedge fund stocks returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 17.4% in 2021 through June 18th but managed to beat the market again by 6.1 percentage points. Unfortunately FRLN wasn't nearly as popular as these 5 stocks (hedge fund sentiment was very bearish); FRLN investors were disappointed as the stock returned -30.7% since the end of the first quarter (through 6/18) 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.
