Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track nearly 900 active prominent money managers and analyze their quarterly 13F filings. The stocks that are heavily bought by hedge funds historically outperformed the market, though there is no shortage of high profile failures like hedge funds' 2018 losses in Facebook and Apple. Let’s take a closer look at what the funds we track think about Arrowhead Pharmaceuticals Inc. (NASDAQ:ARWR) in this article.
Arrowhead Pharmaceuticals Inc. (NASDAQ:ARWR) shareholders have witnessed an increase in enthusiasm from smart money lately. Arrowhead Pharmaceuticals Inc. (NASDAQ:ARWR) was in 30 hedge funds' portfolios at the end of June. The all time high for this statistic was previously 26. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that ARWR isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings).
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 79 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.
Joseph Edelman of Perceptive Advisors
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV 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. Now let's review the recent hedge fund action surrounding Arrowhead Pharmaceuticals Inc. (NASDAQ:ARWR).
Do Hedge Funds Think ARWR Is A Good Stock To Buy Now?
At second quarter's end, a total of 30 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 50% from one quarter earlier. On the other hand, there were a total of 21 hedge funds with a bullish position in ARWR a year ago. With hedge funds' sentiment swirling, there exists a few notable hedge fund managers who were upping their holdings considerably (or already accumulated large positions).
Among these funds, Aquilo Capital Management held the most valuable stake in Arrowhead Pharmaceuticals Inc. (NASDAQ:ARWR), which was worth $35.9 million at the end of the second quarter. On the second spot was Farallon Capital which amassed $30.2 million worth of shares. Perceptive Advisors, Marshall Wace LLP, 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 Aquilo Capital Management allocated the biggest weight to Arrowhead Pharmaceuticals Inc. (NASDAQ:ARWR), around 9.32% of its 13F portfolio. Acuta Capital Partners is also relatively very bullish on the stock, setting aside 3.57 percent of its 13F equity portfolio to ARWR.
Consequently, key hedge funds were breaking ground themselves. Marshall Wace LLP, managed by Paul Marshall and Ian Wace, created the most valuable position in Arrowhead Pharmaceuticals Inc. (NASDAQ:ARWR). Marshall Wace LLP had $20.7 million invested in the company at the end of the quarter. Dmitry Balyasny's Balyasny Asset Management also initiated a $10.8 million position during the quarter. The other funds with new positions in the stock are Steve Cohen's Point72 Asset Management, Mika Toikka's AlphaCrest Capital Management, and Karim Abbadi and Edward McBride's Centiva Capital.
Let's check out hedge fund activity in other stocks - not necessarily in the same industry as Arrowhead Pharmaceuticals Inc. (NASDAQ:ARWR) but similarly valued. These stocks are Skillz Inc. (NYSE:SKLZ), Kohl's Corporation (NYSE:KSS), Oshkosh Corporation (NYSE:OSK), Autoliv Inc. (NYSE:ALV), Omega Healthcare Investors Inc (NYSE:OHI), US Foods Holding Corp. (NYSE:USFD), and Genpact Limited (NYSE:G). All of these stocks' market caps are similar to ARWR's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SKLZ,20,1137649,-6 KSS,40,1340630,5 OSK,28,360479,2 ALV,23,860834,3 OHI,20,142609,-5 USFD,35,1399474,-5 G,22,234361,-1 Average,26.9,782291,-1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 26.9 hedge funds with bullish positions and the average amount invested in these stocks was $782 million. That figure was $211 million in ARWR's case. Kohl's Corporation (NYSE:KSS) is the most popular stock in this table. On the other hand Skillz Inc. (NYSE:SKLZ) is the least popular one with only 20 bullish hedge fund positions. Arrowhead Pharmaceuticals Inc. (NASDAQ:ARWR) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for ARWR is 65. 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. This is a slightly positive signal but we'd rather spend our time researching stocks that hedge funds are piling on. 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 24.9% in 2021 through October 15th and beat the market again by 4.5 percentage points. Unfortunately ARWR wasn't nearly as popular as these 5 stocks and hedge funds that were betting on ARWR were disappointed as the stock returned -20.1% since the end of June (through 10/15) 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 many of these stocks already outperformed the market since 2019.
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Disclosure: None. This article was originally published at Insider Monkey.