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 Arcus Biosciences, Inc. (NYSE:RCUS) and determine whether the smart money was really smart about this stock.
Arcus Biosciences, Inc. (NYSE:RCUS) investors should be aware of an increase in support from the world's most elite money managers in recent months. Arcus Biosciences, Inc. (NYSE:RCUS) was in 28 hedge funds' portfolios at the end of June. The all time high for this statistics is 23. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that RCUS 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.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 56 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'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 34% through August 17th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Samuel Isaly of OrbiMed Advisors
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, legal marijuana is one of the fastest growing industries right now, so we are checking out stock pitches like “the Starbucks of cannabis” to identify the next tenbagger. 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. With all of this in mind let's go over the key hedge fund action surrounding Arcus Biosciences, Inc. (NYSE:RCUS).
What does smart money think about Arcus Biosciences, Inc. (NYSE:RCUS)?
At second quarter's end, a total of 28 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 22% from the first quarter of 2020. On the other hand, there were a total of 14 hedge funds with a bullish position in RCUS a year ago. With hedge funds' capital changing hands, there exists a select group of noteworthy hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).
Among these funds, Biotechnology Value Fund / BVF Inc held the most valuable stake in Arcus Biosciences, Inc. (NYSE:RCUS), which was worth $46.6 million at the end of the third quarter. On the second spot was EcoR1 Capital which amassed $44.8 million worth of shares. Partner Fund Management, Farallon Capital, and Hillhouse Capital 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 Copernicus Capital Management allocated the biggest weight to Arcus Biosciences, Inc. (NYSE:RCUS), around 3.37% of its 13F portfolio. EcoR1 Capital is also relatively very bullish on the stock, earmarking 3.31 percent of its 13F equity portfolio to RCUS.
Consequently, specific money managers have been driving this bullishness. Farallon Capital, initiated the most valuable position in Arcus Biosciences, Inc. (NYSE:RCUS). Farallon Capital had $24.7 million invested in the company at the end of the quarter. D. E. Shaw's D E Shaw also made a $11 million investment in the stock during the quarter. The other funds with new positions in the stock are Brandon Haley's Holocene Advisors, Phill Gross and Robert Atchinson's Adage Capital Management, and Samuel Isaly's OrbiMed Advisors.
Let's also examine hedge fund activity in other stocks similar to Arcus Biosciences, Inc. (NYSE:RCUS). These stocks are Canadian Solar Inc. (NASDAQ:CSIQ), Repare Therapeutics Inc. (NASDAQ:RPTX), Hope Bancorp, Inc. (NASDAQ:HOPE), eXp World Holdings, Inc. (NASDAQ:EXPI), Marcus & Millichap Inc (NYSE:MMI), Compass Diversified (NYSE:CODI), and Translate Bio, Inc. (NASDAQ:TBIO). This group of stocks' market values are similar to RCUS's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CSIQ,12,101171,1 RPTX,17,322038,17 HOPE,19,55274,1 EXPI,11,43524,5 MMI,8,77692,-1 CODI,4,16735,0 TBIO,26,494430,19 Average,13.9,158695,6 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 13.9 hedge funds with bullish positions and the average amount invested in these stocks was $159 million. That figure was $272 million in RCUS's case. Translate Bio, Inc. (NASDAQ:TBIO) is the most popular stock in this table. On the other hand Compass Diversified (NYSE:CODI) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks Arcus Biosciences, Inc. (NYSE:RCUS) is more popular among hedge funds. Our overall hedge fund sentiment score for RCUS is 90. 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. 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 21.3% in 2020 through September 25th and still beat the market by 17.7 percentage points. Unfortunately RCUS wasn't nearly as popular as these 10 stocks and hedge funds that were betting on RCUS were disappointed as the stock returned -28.5% since the end of the second quarter 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.
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Disclosure: None. This article was originally published at Insider Monkey.