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The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 823 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds' and investors' portfolio positions as of June 30th, when the S&P 500 Index was trading around the 3100 level. Stocks kept going up since then. In this article we look at how hedge funds traded Clovis Oncology Inc (NASDAQ:CLVS) and determine whether the smart money was really smart about this stock.
Clovis Oncology Inc (NASDAQ:CLVS) was in 18 hedge funds' portfolios at the end of the second quarter of 2020. The all time high for this statistics is 57. CLVS shareholders have witnessed an increase in support from the world's most elite money managers of late. There were 13 hedge funds in our database with CLVS holdings at the end of March. Our calculations also showed that CLVS isn't among the 30 most popular stocks among hedge funds (click for Q2 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.
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 S&P 500 ETFs by 58 percentage points since March 2017 (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.
William Leland Edwards of Palo Alto Investors
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we are checking out this junior gold mining stock and we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website to get excerpts of these letters in your inbox. Now we're going to view the new hedge fund action encompassing Clovis Oncology Inc (NASDAQ:CLVS).
How have hedgies been trading Clovis Oncology Inc (NASDAQ:CLVS)?
At the end of June, a total of 18 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 38% from the first quarter of 2020. On the other hand, there were a total of 24 hedge funds with a bullish position in CLVS a year ago. With hedge funds' sentiment swirling, there exists an "upper tier" of notable hedge fund managers who were adding to their holdings substantially (or already accumulated large positions).
More specifically, Palo Alto Investors was the largest shareholder of Clovis Oncology Inc (NASDAQ:CLVS), with a stake worth $29.4 million reported as of the end of September. Trailing Palo Alto Investors was Armistice Capital, which amassed a stake valued at $10.8 million. Citadel Investment Group, Ikarian Capital, 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 Healthcare Value Capital allocated the biggest weight to Clovis Oncology Inc (NASDAQ:CLVS), around 4.31% of its 13F portfolio. Palo Alto Investors is also relatively very bullish on the stock, designating 1.77 percent of its 13F equity portfolio to CLVS.
As aggregate interest increased, key money managers have jumped into Clovis Oncology Inc (NASDAQ:CLVS) headfirst. Armistice Capital, managed by Steven Boyd, established the largest position in Clovis Oncology Inc (NASDAQ:CLVS). Armistice Capital had $10.8 million invested in the company at the end of the quarter. Ken Griffin's Citadel Investment Group also initiated a $10.7 million position during the quarter. The other funds with new positions in the stock are Israel Englander's Millennium Management, Chen Tianqiao's Shanda Asset Management, and Noam Gottesman's GLG Partners.
Let's check out hedge fund activity in other stocks - not necessarily in the same industry as Clovis Oncology Inc (NASDAQ:CLVS) but similarly valued. We will take a look at Geopark Ltd (NYSE:GPRK), Varex Imaging Corporation (NASDAQ:VREX), The Shyft Group, Inc. (NASDAQ:SHYF), Boingo Wireless Inc (NASDAQ:WIFI), NextCure, Inc. (NASDAQ:NXTC), SurModics, Inc. (NASDAQ:SRDX), and Live Oak Bancshares Inc (NASDAQ:LOB). This group of stocks' market valuations are similar to CLVS's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position GPRK,13,73150,0 VREX,22,69797,3 SHYF,18,66819,1 WIFI,15,178091,-1 NXTC,16,122234,2 SRDX,15,147028,3 LOB,10,25283,0 Average,15.6,97486,1.1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 15.6 hedge funds with bullish positions and the average amount invested in these stocks was $97 million. That figure was $59 million in CLVS's case. Varex Imaging Corporation (NASDAQ:VREX) is the most popular stock in this table. On the other hand Live Oak Bancshares Inc (NASDAQ:LOB) is the least popular one with only 10 bullish hedge fund positions. Clovis Oncology Inc (NASDAQ:CLVS) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for CLVS is 52.8. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. This is a slightly positive signal but we'd rather spend our time researching stocks that hedge funds are piling on. 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 24.8% in 2020 through the end of September and beat the market by 19.3 percentage points. Unfortunately CLVS wasn't nearly as popular as these 10 stocks and hedge funds that were betting on CLVS were disappointed as the stock returned -13.6% in Q3 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 many of these stocks already outperformed the market so far this year.
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Disclosure: None. This article was originally published at Insider Monkey.