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Did Hedge Funds Drop The Ball On Revance Therapeutics Inc (RVNC) ?

Debasis Saha

We at Insider Monkey have gone over 752 13F filings that hedge funds and prominent investors are required to file by the SEC The 13F filings show the funds' and investors' portfolio positions as of September 30th. In this article, we look at what those funds think of Revance Therapeutics Inc (NASDAQ:RVNC) based on that data.

Revance Therapeutics Inc (NASDAQ:RVNC) investors should pay attention to a decrease in hedge fund sentiment of late. RVNC was in 6 hedge funds' portfolios at the end of the third quarter of 2019. There were 10 hedge funds in our database with RVNC holdings at the end of the previous quarter. Our calculations also showed that RVNC isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

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

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (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 27.8% through November 21, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

[caption id="attachment_26073" align="alignnone" width="600"] Jim Simons of Renaissance Technologies[/caption]

RENAISSANCE TECHNOLOGIES
RENAISSANCE TECHNOLOGIES

We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, "I'm investing more today than I did back in early 2009." So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius' weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager's investor letter and the stock already gained 20 percent. Keeping this in mind we're going to take a glance at the latest hedge fund action regarding Revance Therapeutics Inc (NASDAQ:RVNC).

What have hedge funds been doing with Revance Therapeutics Inc (NASDAQ:RVNC)?

Heading into the fourth quarter of 2019, a total of 6 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -40% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards RVNC over the last 17 quarters. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is RVNC A Good Stock To Buy?
Is RVNC A Good Stock To Buy?

Among these funds, Renaissance Technologies held the most valuable stake in Revance Therapeutics Inc (NASDAQ:RVNC), which was worth $11.4 million at the end of the third quarter. On the second spot was Sio Capital which amassed $4 million worth of shares. Point72 Asset Management, Citadel Investment Group, and MFN Partners were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Sio Capital allocated the biggest weight to Revance Therapeutics Inc (NASDAQ:RVNC), around 1.28% of its 13F portfolio. MFN Partners is also relatively very bullish on the stock, setting aside 0.09 percent of its 13F equity portfolio to RVNC.

Because Revance Therapeutics Inc (NASDAQ:RVNC) has faced bearish sentiment from the entirety of the hedge funds we track, it's easy to see that there exists a select few fund managers who were dropping their positions entirely in the third quarter. Interestingly, Minhua Zhang's Weld Capital Management dropped the biggest investment of the "upper crust" of funds tracked by Insider Monkey, worth close to $0.5 million in stock. David E. Shaw's fund, D E Shaw, also said goodbye to its stock, about $0.3 million worth. These moves are important to note, as total hedge fund interest was cut by 4 funds in the third quarter.

Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Revance Therapeutics Inc (NASDAQ:RVNC) but similarly valued. We will take a look at Movado Group, Inc (NYSE:MOV), Veeco Instruments Inc. (NASDAQ:VECO), Laredo Petroleum Inc (NYSE:LPI), and First Defiance Financial (NASDAQ:FDEF). This group of stocks' market caps are similar to RVNC's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position MOV,10,27501,-10 VECO,14,183411,3 LPI,15,129842,1 FDEF,9,40050,0 Average,12,95201,-1.5 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 12 hedge funds with bullish positions and the average amount invested in these stocks was $95 million. That figure was $21 million in RVNC's case. Laredo Petroleum Inc (NYSE:LPI) is the most popular stock in this table. On the other hand First Defiance Financial (NASDAQ:FDEF) is the least popular one with only 9 bullish hedge fund positions. Compared to these stocks Revance Therapeutics Inc (NASDAQ:RVNC) is even less popular than FDEF. Hedge funds clearly dropped the ball on RVNC as the stock delivered strong returns, though hedge funds' consensus picks still generated respectable returns. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. A small number of hedge funds were also right about betting on RVNC as the stock returned 37.7% during the fourth quarter (through the end of November) and outperformed the market by an even larger margin.

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

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