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How Did Innoviva, Inc. (INVA) Compare Against Hedge Fund Darlings in 2019?

Asma UL Husna

It seems that the masses and most of the financial media hate hedge funds and what they do, but why is this hatred of hedge funds so prominent? At the end of the day, these asset management firms do not gamble the hard-earned money of the people who are on the edge of poverty. Truth be told, most hedge fund managers and other smaller players within this industry are very smart and skilled investors. Of course, they may also make wrong bets in some instances, but no one knows what the future holds and how market participants will react to the bountiful news that floods in each day. The Standard and Poor’s 500 Total Return Index ETFs returned 31.2% in 2019. Conversely, hedge funds’ top 20 large-cap stock picks generated a return of 41.3% during the same period, with the majority of these stock picks outperforming the broader market benchmark. Coincidence? It might happen to be so, but it is unlikely. Our research covering the last 18 years indicates that hedge funds' consensus stock picks generate superior risk-adjusted returns. That's why we believe it isn't a waste of time to check out hedge fund sentiment before you invest in a stock like Innoviva, Inc. (NASDAQ:INVA).

Is Innoviva, Inc. (NASDAQ:INVA) going to take off soon? The smart money is becoming more confident. The number of long hedge fund bets improved by 1 in recent months. Our calculations also showed that INVA isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video at the end of this article for Q2 rankings).

To most traders, hedge funds are seen as unimportant, outdated financial tools of the past. While there are greater than 8000 funds trading today, We choose to focus on the moguls of this group, approximately 750 funds. It is estimated that this group of investors orchestrate the majority of all hedge funds' total capital, and by following their highest performing investments, Insider Monkey has found a number of investment strategies that have historically beaten the broader indices. Insider Monkey's flagship short hedge fund strategy defeated the S&P 500 short ETFs by around 20 percentage points per annum since its inception in May 2014. Our portfolio of short stocks lost 27.8% since February 2017 (through November 21st) even though the market was up more than 39% during the same period. We just shared a list of 7 short targets in our latest quarterly update .

[caption id="attachment_339332" align="aligncenter" width="500"] Alex Denner of Sarissa Capital Management[/caption]

Alex Denner Sarissa Capital

We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world's largest cannabis market, so we check out this European marijuana stock pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. 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 is still extremely cheap despite already gaining 20 percent. With all of this in mind let's take a gander at the fresh hedge fund action encompassing Innoviva, Inc. (NASDAQ:INVA).

How have hedgies been trading Innoviva, Inc. (NASDAQ:INVA)?

At Q3's end, a total of 24 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 4% from the second quarter of 2019. Below, you can check out the change in hedge fund sentiment towards INVA over the last 17 quarters. With the smart money's sentiment swirling, there exists an "upper tier" of noteworthy hedge fund managers who were increasing their stakes significantly (or already accumulated large positions).

More specifically, Renaissance Technologies was the largest shareholder of Innoviva, Inc. (NASDAQ:INVA), with a stake worth $79.9 million reported as of the end of September. Trailing Renaissance Technologies was Sarissa Capital Management, which amassed a stake valued at $65.8 million. D E Shaw, GLG Partners, and Citadel Investment Group 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 Sarissa Capital Management allocated the biggest weight to Innoviva, Inc. (NASDAQ:INVA), around 8.25% of its 13F portfolio. Antara Capital is also relatively very bullish on the stock, designating 1.85 percent of its 13F equity portfolio to INVA.

As one would reasonably expect, some big names were leading the bulls' herd. Antara Capital, managed by Himanshu Gulati, established the biggest call position in Innoviva, Inc. (NASDAQ:INVA). Antara Capital had $5.8 million invested in the company at the end of the quarter. Paul Tudor Jones's Tudor Investment Corp also made a $0.9 million investment in the stock during the quarter. The other funds with brand new INVA positions are Andrew Weiss's Weiss Asset Management and Gavin Saitowitz and Cisco J. del Valle's Springbok Capital.

Let's also examine hedge fund activity in other stocks similar to Innoviva, Inc. (NASDAQ:INVA). These stocks are CTS Corporation (NYSE:CTS), National Bank Holdings Corp (NYSE:NBHC), K12 Inc. (NYSE:LRN), and Hess Midstream LP (NYSE:HESM). This group of stocks' market values are closest to INVA's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CTS,10,86136,1 NBHC,11,78989,1 LRN,17,133604,-5 HESM,7,9217,1 Average,11.25,76987,-0.5 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 11.25 hedge funds with bullish positions and the average amount invested in these stocks was $77 million. That figure was $225 million in INVA's case. K12 Inc. (NYSE:LRN) is the most popular stock in this table. On the other hand Hess Midstream LP (NYSE:HESM) is the least popular one with only 7 bullish hedge fund positions. Compared to these stocks Innoviva, Inc. (NASDAQ:INVA) is more popular among hedge funds. 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 10.1 percentage points. Unfortunately INVA wasn't nearly as popular as these 20 stocks and hedge funds that were betting on INVA were disappointed as the stock returned -18.9% in 2019 and trailed 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 65 percent of these stocks outperformed the market in 2019. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

5 Most Popular Stocks Among Hedge Funds

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

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