A market surge in the first quarter, spurred by easing global macroeconomic concerns and Powell's pivot ended up having a positive impact on the markets and many hedge funds as a result. The stocks of smaller companies which were especially hard hit during the fourth quarter slightly outperformed the market during the first quarter. Unfortunately, Trump is unpredictable and volatility returned in the second quarter and smaller-cap stocks went back to selling off. We finished compiling the latest 13F filings to get an idea about what hedge funds are thinking about the overall market as well as individual stocks. In this article we will study the hedge fund sentiment to see how those concerns affected their ownership of Arrowhead Pharmaceuticals, Inc. (NASDAQ:ARWR) during the quarter.
Is Arrowhead Pharmaceuticals, Inc. (NASDAQ:ARWR) an excellent investment right now? Prominent investors are in a bullish mood. The number of long hedge fund positions advanced by 3 recently. Our calculations also showed that ARWR isn't among the 30 most popular stocks among hedge funds.
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 flagship best performing hedge funds strategy returned 25.8% year to date (through May 30th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 40 percentage points since its inception (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Let's take a gander at the key hedge fund action surrounding Arrowhead Pharmaceuticals, Inc. (NASDAQ:ARWR).
Hedge fund activity in Arrowhead Pharmaceuticals, Inc. (NASDAQ:ARWR)
At Q1's end, a total of 16 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 23% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards ARWR over the last 15 quarters. With hedgies' capital changing hands, there exists an "upper tier" of noteworthy hedge fund managers who were boosting their stakes significantly (or already accumulated large positions).
More specifically, Vivo Capital was the largest shareholder of Arrowhead Pharmaceuticals, Inc. (NASDAQ:ARWR), with a stake worth $42.7 million reported as of the end of March. Trailing Vivo Capital was Farallon Capital, which amassed a stake valued at $35.2 million. Adage Capital Management, Aquilo Capital Management, and Millennium Management were also very fond of the stock, giving the stock large weights in their portfolios.
Now, key money managers have been driving this bullishness. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, created the biggest position in Arrowhead Pharmaceuticals, Inc. (NASDAQ:ARWR). Arrowstreet Capital had $4 million invested in the company at the end of the quarter. Jim Simons's Renaissance Technologies also made a $3.1 million investment in the stock during the quarter. The following funds were also among the new ARWR investors: John Overdeck and David Siegel's Two Sigma Advisors, Joel Greenblatt's Gotham Asset Management, and Jeffrey Talpins's Element Capital Management.
Let's go over hedge fund activity in other stocks similar to Arrowhead Pharmaceuticals, Inc. (NASDAQ:ARWR). These stocks are Liberty Oilfield Services Inc. (NYSE:LBRT), Eagle Bancorp, Inc. (NASDAQ:EGBN), PennyMac Financial Services Inc (NYSE:PFSI), and Provident Financial Services, Inc. (NYSE:PFS). This group of stocks' market values resemble ARWR's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position LBRT,14,77200,2 EGBN,11,45405,-1 PFSI,16,113181,6 PFS,6,55197,-2 Average,11.75,72746,1.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 11.75 hedge funds with bullish positions and the average amount invested in these stocks was $73 million. That figure was $172 million in ARWR's case. PennyMac Financial Services Inc (NYSE:PFSI) is the most popular stock in this table. On the other hand Provident Financial Services, Inc. (NYSE:PFS) is the least popular one with only 6 bullish hedge fund positions. Arrowhead Pharmaceuticals, Inc. (NASDAQ:ARWR) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. Hedge funds were also right about betting on ARWR as the stock returned 49.9% during the same period and outperformed the market by an even larger margin. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.