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Did Hedge Funds Drop The Ball On Adverum Biotechnologies, Inc. (ADVM) ?

Nina Todic

Like everyone else, elite investors make mistakes. Some of their top consensus picks, such as Amazon, Facebook and Alibaba, have not done well in Q4 due to various reasons. Nevertheless, the data show elite investors' consensus picks have done well on average over the long-term. The top 20 stocks among hedge funds beat the S&P 500 Index ETF by more than 6 percentage points so far this year. Because their consensus picks have done well, we pay attention to what elite funds think before doing extensive research on a stock. In this article, we take a closer look at Adverum Biotechnologies, Inc. (NASDAQ:ADVM) from the perspective of those elite funds.

Adverum Biotechnologies, Inc. (NASDAQ:ADVM) was in 12 hedge funds' portfolios at the end of the first quarter of 2019. ADVM has experienced a decrease in hedge fund sentiment recently. There were 17 hedge funds in our database with ADVM holdings at the end of the previous quarter. Our calculations also showed that advm isn't among the 30 most popular stocks among hedge funds.

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

Let's check out the fresh hedge fund action surrounding Adverum Biotechnologies, Inc. (NASDAQ:ADVM).

Hedge fund activity in Adverum Biotechnologies, Inc. (NASDAQ:ADVM)

At the end of the first quarter, a total of 12 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -29% from the previous quarter. On the other hand, there were a total of 28 hedge funds with a bullish position 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.

No of Hedge Funds with ADVM Positions

The largest stake in Adverum Biotechnologies, Inc. (NASDAQ:ADVM) was held by Renaissance Technologies, which reported holding $19.9 million worth of stock at the end of March. It was followed by Adage Capital Management with a $15.7 million position. Other investors bullish on the company included OrbiMed Advisors, Water Street Capital, and Point72 Asset Management.

Seeing as Adverum Biotechnologies, Inc. (NASDAQ:ADVM) has witnessed a decline in interest from hedge fund managers, it's safe to say that there is a sect of funds who sold off their positions entirely in the third quarter. Intriguingly, Joseph Edelman's Perceptive Advisors dropped the largest position of the "upper crust" of funds followed by Insider Monkey, comprising close to $1 million in stock. Peter Algert and Kevin Coldiron's fund, Algert Coldiron Investors, also cut its stock, about $0.3 million worth. These moves are interesting, as aggregate hedge fund interest fell by 5 funds in the third quarter.

Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Adverum Biotechnologies, Inc. (NASDAQ:ADVM) but similarly valued. We will take a look at Endeavour Silver Corp. (NYSE:EXK), Sterling Construction Company, Inc. (NASDAQ:STRL), Utah Medical Products, Inc. (NASDAQ:UTMD), and Daseke, Inc. (NASDAQ:DSKE). This group of stocks' market caps are closest to ADVM's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position EXK,7,19804,0 STRL,15,50586,4 UTMD,8,32509,0 DSKE,9,9685,0 Average,9.75,28146,1 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 9.75 hedge funds with bullish positions and the average amount invested in these stocks was $28 million. That figure was $52 million in ADVM's case. Sterling Construction Company, Inc. (NASDAQ:STRL) is the most popular stock in this table. On the other hand Endeavour Silver Corp. (NYSE:EXK) is the least popular one with only 7 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 calculations showed that top 20 most popular stocks among hedge funds returned 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. Hedge funds were also right about betting on ADVM as the stock returned 119.5% during the same period and outperformed the market by an even larger margin. Hedge funds were rewarded for their relative bullishness.

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

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