Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors' consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of Dicerna Pharmaceuticals Inc (NASDAQ:DRNA).
Dicerna Pharmaceuticals Inc (NASDAQ:DRNA) was in 25 hedge funds' portfolios at the end of March. DRNA has experienced a decrease in activity from the world's largest hedge funds of late. There were 31 hedge funds in our database with DRNA positions at the end of the previous quarter. Our calculations also showed that DRNA isn't among the 30 most popular stocks among hedge funds (click for Q1 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 a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's monthly stock picks returned 101% since March 2017 and outperformed the S&P 500 ETFs by more than 58 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
[caption id="attachment_27666" align="aligncenter" width="399"] Roberto Mignone of Bridger Management[/caption]
We leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like these. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind let's review the fresh hedge fund action surrounding Dicerna Pharmaceuticals Inc (NASDAQ:DRNA).
What does smart money think about Dicerna Pharmaceuticals Inc (NASDAQ:DRNA)?
At the end of the first quarter, a total of 25 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -19% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards DRNA over the last 18 quarters. With hedge funds' positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were increasing their holdings substantially (or already accumulated large positions).
Among these funds, EcoR1 Capital held the most valuable stake in Dicerna Pharmaceuticals Inc (NASDAQ:DRNA), which was worth $61.5 million at the end of the third quarter. On the second spot was Citadel Investment Group which amassed $37.2 million worth of shares. Bridger Management, Aquilo Capital Management, and Point72 Asset Management 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 Aquilo Capital Management allocated the biggest weight to Dicerna Pharmaceuticals Inc (NASDAQ:DRNA), around 8.86% of its 13F portfolio. EcoR1 Capital is also relatively very bullish on the stock, dishing out 6.42 percent of its 13F equity portfolio to DRNA.
Because Dicerna Pharmaceuticals Inc (NASDAQ:DRNA) has witnessed a decline in interest from the aggregate hedge fund industry, logic holds that there lies a certain "tier" of funds who sold off their positions entirely by the end of the first quarter. Intriguingly, Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital dropped the largest stake of the 750 funds monitored by Insider Monkey, worth an estimated $4.4 million in stock. Christiana Goh Bardon's fund, Burrage Capital Management, also sold off its stock, about $2.3 million worth. These transactions are interesting, as total hedge fund interest was cut by 6 funds by the end of the first quarter.
Let's check out hedge fund activity in other stocks similar to Dicerna Pharmaceuticals Inc (NASDAQ:DRNA). These stocks are Allegiant Travel Company (NASDAQ:ALGT), PROS Holdings, Inc. (NYSE:PRO), Visteon Corp (NASDAQ:VC), and Korn Ferry (NYSE:KFY). This group of stocks' market caps resemble DRNA's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ALGT,19,252399,-5 PRO,16,151037,-4 VC,19,152241,-10 KFY,20,136009,1 Average,18.5,172922,-4.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 18.5 hedge funds with bullish positions and the average amount invested in these stocks was $173 million. That figure was $282 million in DRNA's case. Korn Ferry (NYSE:KFY) is the most popular stock in this table. On the other hand PROS Holdings, Inc. (NYSE:PRO) is the least popular one with only 16 bullish hedge fund positions. Compared to these stocks Dicerna Pharmaceuticals Inc (NASDAQ:DRNA) is more popular among hedge funds. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 13.9% in 2020 through June 10th and still beat the market by 14.2 percentage points. Unfortunately DRNA wasn't nearly as popular as these 10 stocks and hedge funds that were betting on DRNA were disappointed as the stock returned 13.8% during the second quarter (through June 10th) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
Disclosure: None. This article was originally published at Insider Monkey.