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At the end of February we announced the arrival of the first US recession since 2009 and we predicted 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 Adverum Biotechnologies, Inc. (NASDAQ:ADVM).
IsADVM a good stock to buy? Prominent investors were in an optimistic mood. The number of bullish hedge fund positions moved up by 5 in recent months. Adverum Biotechnologies, Inc. (NASDAQ:ADVM) was in 30 hedge funds' portfolios at the end of September. The all time high for this statistic is 28. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that ADVM 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). There were 25 hedge funds in our database with ADVM positions at the end of the second quarter.
Video: Watch our video about the top 5 most popular hedge fund stocks.
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 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.
Peter Kolchinsky of RA Capital Management
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this under the radar cannabis stock right now. We go through lists like the 15 best blue chip stocks to buy 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. With all of this in mind let's take a glance at the recent hedge fund action surrounding Adverum Biotechnologies, Inc. (NASDAQ:ADVM).
Do Hedge Funds Think ADVM Is A Good Stock To Buy Now?
Heading into the fourth quarter of 2020, a total of 30 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 20% from the second quarter of 2020. By comparison, 12 hedge funds held shares or bullish call options in ADVM a year ago. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Of the funds tracked by Insider Monkey, Peter Kolchinsky's RA Capital Management has the most valuable position in Adverum Biotechnologies, Inc. (NASDAQ:ADVM), worth close to $96.9 million, comprising 1.8% of its total 13F portfolio. The second largest stake is held by Behzad Aghazadeh of Avoro Capital Advisors (venBio Select Advisor), with a $82.4 million position; the fund has 1.2% of its 13F portfolio invested in the stock. Some other peers with similar optimism include Samuel Isaly's OrbiMed Advisors, Lawrence Kam's Sonic Capital and Eli Casdin's Casdin Capital. In terms of the portfolio weights assigned to each position Sonic Capital allocated the biggest weight to Adverum Biotechnologies, Inc. (NASDAQ:ADVM), around 29.76% of its 13F portfolio. Ghost Tree Capital is also relatively very bullish on the stock, setting aside 3.46 percent of its 13F equity portfolio to ADVM.
With a general bullishness amongst the heavyweights, specific money managers were leading the bulls' herd. Farallon Capital, founded by Thomas Steyer, assembled the largest position in Adverum Biotechnologies, Inc. (NASDAQ:ADVM). Farallon Capital had $15.5 million invested in the company at the end of the quarter. Paul Marshall and Ian Wace's Marshall Wace LLP also initiated a $3.8 million position during the quarter. The other funds with new positions in the stock are Noam Gottesman's GLG Partners, Greg Eisner's Engineers Gate Manager, and Anand Parekh's Alyeska Investment Group.
Let's now review hedge fund activity in other stocks similar to Adverum Biotechnologies, Inc. (NASDAQ:ADVM). These stocks are New Frontier Health Corporation (NYSE:NFH), Yalla Group Limited (NYSE:YALA), Xenia Hotels & Resorts Inc (NYSE:XHR), Cornerstone Building Brands, Inc. (NYSE:CNR), Standard Motor Products, Inc. (NYSE:SMP), Gravity Co., LTD. (NASDAQ:GRVY), and Zogenix, Inc. (NASDAQ:ZGNX). This group of stocks' market caps are similar to ADVM's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position NFH,15,170005,0 YALA,7,21747,7 XHR,9,29036,-1 CNR,22,84894,3 SMP,19,86241,4 GRVY,3,7704,-1 ZGNX,38,409878,0 Average,16.1,115644,1.7 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 16.1 hedge funds with bullish positions and the average amount invested in these stocks was $116 million. That figure was $413 million in ADVM's case. Zogenix, Inc. (NASDAQ:ZGNX) is the most popular stock in this table. On the other hand Gravity Co., LTD. (NASDAQ:GRVY) is the least popular one with only 3 bullish hedge fund positions. Adverum Biotechnologies, Inc. (NASDAQ:ADVM) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for ADVM is 78.6. 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 33.3% in 2020 through December 18th and still beat the market by 16.4 percentage points. Hedge funds were also right about betting on ADVM as the stock returned 19.8% since the end of Q3 (through 12/18) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.