Last year we predicted the arrival of the first US recession since 2009 and we told in advance that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Arvinas, Inc. (NASDAQ:ARVN).
Is ARVN a buy? Arvinas, Inc. (NASDAQ:ARVN) has seen an increase in hedge fund sentiment recently. Arvinas, Inc. (NASDAQ:ARVN) was in 34 hedge funds' portfolios at the end of the fourth quarter of 2020. The all time high for this statistic was previously 31. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that ARVN isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings).
Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 percentage points since March 2017 (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 13% through November 17th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Peter Kolchinsky of RA Capital Management
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, we heard that billionaire Peter Thiel is backing this psychedelic-drug startup. So, we are taking a closer look at this space. We go through lists like the 10 best biotech stocks under $10 to identify the next stock with 10x upside potential. 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 website. Now let's take a glance at the fresh hedge fund action encompassing Arvinas, Inc. (NASDAQ:ARVN).
Do Hedge Funds Think ARVN Is A Good Stock To Buy Now?
At Q4's end, a total of 34 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 31% from the previous quarter. The graph below displays the number of hedge funds with bullish position in ARVN over the last 22 quarters. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, RA Capital Management held the most valuable stake in Arvinas, Inc. (NASDAQ:ARVN), which was worth $311.9 million at the end of the fourth quarter. On the second spot was Marshall Wace LLP which amassed $73.3 million worth of shares. Rock Springs Capital Management, Sectoral Asset Management, and Point72 Asset Management 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 Octagon Capital Advisors allocated the biggest weight to Arvinas, Inc. (NASDAQ:ARVN), around 5.26% of its 13F portfolio. RA Capital Management is also relatively very bullish on the stock, earmarking 4.36 percent of its 13F equity portfolio to ARVN.
Now, key hedge funds have been driving this bullishness. Consonance Capital Management, managed by Mitchell Blutt, established the biggest position in Arvinas, Inc. (NASDAQ:ARVN). Consonance Capital Management had $36.1 million invested in the company at the end of the quarter. Frank Fu's CaaS Capital also made a $18.3 million investment in the stock during the quarter. The other funds with brand new ARVN positions are Brad Farber's Atika Capital, Louis Bacon's Moore Global Investments, and Ting Jia's Octagon Capital Advisors.
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Arvinas, Inc. (NASDAQ:ARVN) but similarly valued. These stocks are Rayonier Inc. (NYSE:RYN), Selective Insurance Group, Inc. (NASDAQ:SIGI), Terreno Realty Corporation (NYSE:TRNO), UniFirst Corp (NYSE:UNF), Vicor Corp (NASDAQ:VICR), Cloudera, Inc. (NYSE:CLDR), and QTS Realty Trust Inc (NYSE:QTS). All of these stocks' market caps are closest to ARVN's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position RYN,16,384072,-1 SIGI,15,57325,-6 TRNO,9,22576,-6 UNF,15,60076,-4 VICR,18,78251,-2 CLDR,29,1005135,-2 QTS,23,397053,-2 Average,17.9,286355,-3.3 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 17.9 hedge funds with bullish positions and the average amount invested in these stocks was $286 million. That figure was $811 million in ARVN's case. Cloudera, Inc. (NYSE:CLDR) is the most popular stock in this table. On the other hand Terreno Realty Corporation (NYSE:TRNO) is the least popular one with only 9 bullish hedge fund positions. Compared to these stocks Arvinas, Inc. (NASDAQ:ARVN) is more popular among hedge funds. Our overall hedge fund sentiment score for ARVN is 90. 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 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 7.9% in 2021 through April 1st and still beat the market by 0.4 percentage points. Unfortunately ARVN wasn't nearly as popular as these 30 stocks and hedge funds that were betting on ARVN were disappointed as the stock returned -22.5% since the end of the fourth quarter (through 4/1) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 30 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.