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Out of thousands of stocks that are currently traded on the market, it is difficult to identify those that will really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of nearly 817 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has the potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about AVEO Pharmaceuticals, Inc. (NASDAQ:AVEO).
Is AVEO a good stock to buy now? AVEO Pharmaceuticals, Inc. (NASDAQ:AVEO) has seen a decrease in hedge fund interest in recent months. AVEO Pharmaceuticals, Inc. (NASDAQ:AVEO) was in 8 hedge funds' portfolios at the end of the third quarter of 2020. The all time high for this statistics is 14. There were 13 hedge funds in our database with AVEO holdings at the end of June. Our calculations also showed that AVEO 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).
Video: Watch our video about the top 5 most popular hedge fund stocks.
In the financial world there are numerous metrics shareholders can use to grade stocks. A couple of the less utilized metrics are hedge fund and insider trading sentiment. We have shown that, historically, those who follow the best picks of the best investment managers can outperform their index-focused peers by a significant margin (see the details here).
David Harding of Winton Capital Management
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 5 best cheap stocks to buy according to Ray Dalio to identify stocks with 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. With all of this in mind let's take a glance at the recent hedge fund action regarding AVEO Pharmaceuticals, Inc. (NASDAQ:AVEO).
What does smart money think about AVEO Pharmaceuticals, Inc. (NASDAQ:AVEO)?
At the end of September, a total of 8 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -38% from the previous quarter. The graph below displays the number of hedge funds with bullish position in AVEO over the last 21 quarters. With the smart money's sentiment swirling, there exists an "upper tier" of noteworthy hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Cormorant Asset Management, managed by Bihua Chen, holds the number one position in AVEO Pharmaceuticals, Inc. (NASDAQ:AVEO). Cormorant Asset Management has a $5.9 million position in the stock, comprising 0.2% of its 13F portfolio. Sitting at the No. 2 spot is Jerome Pfund and Michael Sjostrom of Sectoral Asset Management, with a $0.6 million position; 0.1% of its 13F portfolio is allocated to the company. Some other professional money managers with similar optimism consist of Ken Griffin's Citadel Investment Group, Peter Muller's PDT Partners and David Harding's Winton Capital Management. In terms of the portfolio weights assigned to each position Cormorant Asset Management allocated the biggest weight to AVEO Pharmaceuticals, Inc. (NASDAQ:AVEO), around 0.23% of its 13F portfolio. Sectoral Asset Management is also relatively very bullish on the stock, dishing out 0.05 percent of its 13F equity portfolio to AVEO.
Since AVEO Pharmaceuticals, Inc. (NASDAQ:AVEO) has experienced a decline in interest from the entirety of the hedge funds we track, it's safe to say that there exists a select few fund managers who were dropping their positions entirely last quarter. At the top of the heap, James E. Flynn's Deerfield Management said goodbye to the largest investment of all the hedgies tracked by Insider Monkey, comprising about $1.8 million in stock, and Ari Zweiman's 683 Capital Partners was right behind this move, as the fund dropped about $1.7 million worth. These bearish behaviors are important to note, as total hedge fund interest was cut by 5 funds last quarter.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as AVEO Pharmaceuticals, Inc. (NASDAQ:AVEO) but similarly valued. These stocks are Standard AVB Financial Corp. (NASDAQ:STND), Exicure, Inc. (NASDAQ:XCUR), Culp, Inc. (NYSE:CULP), Galectin Therapeutics Inc. (NASDAQ:GALT), Matinas Biopharma Holdings, Inc. (NYSE:MTNB), Vericity, Inc. (NASDAQ:VERY), and Provident Bancorp, Inc. (NASDAQ:PVBC). All of these stocks' market caps match AVEO's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position STND,3,8593,2 XCUR,11,21812,2 CULP,14,18280,0 GALT,2,74,-2 MTNB,6,9947,-4 VERY,2,1177,0 PVBC,7,5171,2 Average,6.4,9293,0 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 6.4 hedge funds with bullish positions and the average amount invested in these stocks was $9 million. That figure was $8 million in AVEO's case. Culp, Inc. (NYSE:CULP) is the most popular stock in this table. On the other hand Galectin Therapeutics Inc. (NASDAQ:GALT) is the least popular one with only 2 bullish hedge fund positions. AVEO Pharmaceuticals, Inc. (NASDAQ:AVEO) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for AVEO is 42.1. 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 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 31.6% in 2020 through December 2nd and beat the market again by 16 percentage points. Unfortunately AVEO wasn't nearly as popular as these 20 stocks and hedge funds that were betting on AVEO were disappointed as the stock returned -11.8% since the end of September (through 12/2) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
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Disclosure: None. This article was originally published at Insider Monkey.