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AVROBIO, Inc. (AVRO): Are Hedge Funds Right About This Stock?

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A whopping number of 13F filings filed with U.S. Securities and Exchange Commission has been processed by Insider Monkey so that individual investors can look at the overall hedge fund sentiment towards the stocks included in their watchlists. These freshly-submitted public filings disclose money managers’ equity positions as of the end of the three-month period that ended June 28, so let’s proceed with the discussion of the hedge fund sentiment on AVROBIO, Inc. (NASDAQ:AVRO).

AVROBIO, Inc. (NASDAQ:AVRO) was in 9 hedge funds' portfolios at the end of June. AVRO has seen an increase in hedge fund sentiment in recent months. There were 4 hedge funds in our database with AVRO positions at the end of the previous quarter. Our calculations also showed that AVRO isn't among the 30 most popular stocks among hedge funds (see the video below).

5 Most Popular Stocks Among Hedge Funds
5 Most Popular Stocks Among Hedge Funds

Video: Click the image to 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 has shown that hedge funds' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.

Samuel Isaly Orbimed Advisors
Samuel Isaly Orbimed Advisors

Unlike other investors who track every movement of the 25 largest hedge funds, our long-short investment strategy relies on hedge fund buy/sell signals given by the 100 best performing hedge funds. Let's review the fresh hedge fund action regarding AVROBIO, Inc. (NASDAQ:AVRO).

Hedge fund activity in AVROBIO, Inc. (NASDAQ:AVRO)

At the end of the second quarter, a total of 9 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 125% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in AVRO over the last 16 quarters. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

No of Hedge Funds with AVRO Positions
No of Hedge Funds with AVRO Positions

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Citadel Investment Group, managed by Ken Griffin, holds the most valuable position in AVROBIO, Inc. (NASDAQ:AVRO). Citadel Investment Group has a $26.1 million position in the stock, comprising less than 0.1%% of its 13F portfolio. The second largest stake is of Farallon Capital, with a $16.8 million position; 0.1% of its 13F portfolio is allocated to the company. Some other hedge funds and institutional investors that are bullish encompass Bihua Chen's Cormorant Asset Management, Christopher James's Partner Fund Management and Samuel Isaly's OrbiMed Advisors.

As one would reasonably expect, some big names have been driving this bullishness. Partner Fund Management, managed by Christopher James, assembled the most valuable position in AVROBIO, Inc. (NASDAQ:AVRO). Partner Fund Management had $4.1 million invested in the company at the end of the quarter. Warren Lammert's Granite Point Capital also made a $1 million investment in the stock during the quarter. The other funds with brand new AVRO positions are Israel Englander's Millennium Management, Renaissance Technologies, and Gavin Saitowitz and Cisco J. del Valle's Springbok Capital.

Let's also examine hedge fund activity in other stocks similar to AVROBIO, Inc. (NASDAQ:AVRO). These stocks are Acorda Therapeutics Inc (NASDAQ:ACOR), Calyxt, Inc. (NASDAQ:CLXT), Assembly Biosciences Inc (NASDAQ:ASMB), and GenMark Diagnostics, Inc (NASDAQ:GNMK). All of these stocks' market caps are closest to AVRO's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ACOR,16,108015,-6 CLXT,3,5882,0 ASMB,18,82204,-1 GNMK,14,74719,0 Average,12.75,67705,-1.75 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 12.75 hedge funds with bullish positions and the average amount invested in these stocks was $68 million. That figure was $55 million in AVRO's case. Assembly Biosciences Inc (NASDAQ:ASMB) is the most popular stock in this table. On the other hand Calyxt, Inc. (NASDAQ:CLXT) is the least popular one with only 3 bullish hedge fund positions. AVROBIO, Inc. (NASDAQ:AVRO) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and 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 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately AVRO wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); AVRO investors were disappointed as the stock returned -13.2% during the third quarter 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 in 2019.

Disclosure: None. This article was originally published at Insider Monkey.

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