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Hedge Funds and other institutional investors have just completed filing their 13Fs with the Securities and Exchange Commission, revealing their equity portfolios as of the end of September. At Insider Monkey, we follow nearly 817 active hedge funds and notable investors and by analyzing their 13F filings, we can determine the stocks that they are collectively bullish on. One of their picks is Aurora Cannabis Inc. (NYSE:ACB), so let’s take a closer look at the sentiment that surrounds it in the current quarter.
Is ACB a good stock to buy now? Hedge fund interest in Aurora Cannabis Inc. (NYSE:ACB) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that ACB isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks). The level and the change in hedge fund popularity aren't the only variables you need to analyze to decipher hedge funds' perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That's why at the end of this article we will examine companies such as FinVolution Group (NYSE:FINV), Ribbon Communications Inc. (NASDAQ:RBBN), and Universal Logistics Holdings, Inc. (NASDAQ:ULH) to gather more data points.
Video: Watch our video about the top 5 most popular hedge fund stocks.
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 66 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.
Ken Griffin of Citadel Investment Group
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. 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 we're going to take a glance at the fresh hedge fund action encompassing Aurora Cannabis Inc. (NYSE:ACB).
Do Hedge Funds Think ACB Is A Good Stock To Buy Now?
At the end of September, a total of 10 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from one quarter earlier. On the other hand, there were a total of 11 hedge funds with a bullish position in ACB a year ago. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to Insider Monkey's hedge fund database, D E Shaw, managed by D. E. Shaw, holds the biggest position in Aurora Cannabis Inc. (NYSE:ACB). D E Shaw has a $3 million position in the stock, comprising less than 0.1%% of its 13F portfolio. The second most bullish fund manager is Ken Griffin of Citadel Investment Group, with a $2.6 million call position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Other hedge funds and institutional investors with similar optimism include Ken Griffin's Citadel Investment Group, Renaissance Technologies and Israel Englander's Millennium Management. In terms of the portfolio weights assigned to each position Chescapmanager LLC allocated the biggest weight to Aurora Cannabis Inc. (NYSE:ACB), around 0.04% of its 13F portfolio. Weld Capital Management is also relatively very bullish on the stock, setting aside 0.04 percent of its 13F equity portfolio to ACB.
Since Aurora Cannabis Inc. (NYSE:ACB) has experienced falling interest from the entirety of the hedge funds we track, it's safe to say that there was a specific group of funds that decided to sell off their entire stakes by the end of the third quarter. At the top of the heap, Kenneth Tropin's Graham Capital Management dumped the biggest stake of the "upper crust" of funds monitored by Insider Monkey, totaling close to $25.7 million in stock, and Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital was right behind this move, as the fund said goodbye to about $17 million worth. These transactions are intriguing to say the least, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let's now review hedge fund activity in other stocks similar to Aurora Cannabis Inc. (NYSE:ACB). These stocks are FinVolution Group (NYSE:FINV), Ribbon Communications Inc. (NASDAQ:RBBN), Universal Logistics Holdings, Inc. (NASDAQ:ULH), iHeartMedia, Inc. (NASDAQ:IHRT), UMH Properties, Inc (NYSE:UMH), ConnectOne Bancorp Inc (NASDAQ:CNOB), and Trueblue Inc (NYSE:TBI). All of these stocks' market caps match ACB's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position FINV,5,1999,-4 RBBN,9,20789,0 ULH,10,19878,1 IHRT,21,117374,-3 UMH,8,7977,2 CNOB,9,19690,-2 TBI,15,46144,1 Average,11,33407,-0.7 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 11 hedge funds with bullish positions and the average amount invested in these stocks was $33 million. That figure was $9 million in ACB's case. iHeartMedia, Inc. (NASDAQ:IHRT) is the most popular stock in this table. On the other hand FinVolution Group (NYSE:FINV) is the least popular one with only 5 bullish hedge fund positions. Aurora Cannabis Inc. (NYSE:ACB) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for ACB is 45.6. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 32.9% in 2020 through December 8th and still beat the market by 16.2 percentage points. A small number of hedge funds were also right about betting on ACB as the stock returned 128% since the end of the third quarter (through 12/8) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.