Is Arvinas, Inc. (NASDAQ:ARVN) a good investment right now? We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.
Is Arvinas, Inc. (NASDAQ:ARVN) a bargain? The smart money is becoming less confident. The number of bullish hedge fund bets decreased by 1 in recent months. Our calculations also showed that ARVN isn't among the 30 most popular stocks among hedge funds (see the video below). Video: Click the image to 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 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.
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn't rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let's take a peek at the fresh hedge fund action surrounding Arvinas, Inc. (NASDAQ:ARVN).
How are hedge funds trading Arvinas, Inc. (NASDAQ:ARVN)?
At the end of the second quarter, a total of 13 of the hedge funds tracked by Insider Monkey were long this stock, a change of -7% from the previous quarter. The graph below displays the number of hedge funds with bullish position in ARVN over the last 16 quarters. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, OrbiMed Advisors held the most valuable stake in Arvinas, Inc. (NASDAQ:ARVN), which was worth $58.9 million at the end of the second quarter. On the second spot was RA Capital Management which amassed $37.1 million worth of shares. Moreover, Deerfield Management, Point72 Asset Management, and Hillhouse Capital Management were also bullish on Arvinas, Inc. (NASDAQ:ARVN), allocating a large percentage of their portfolios to this stock.
Due to the fact that Arvinas, Inc. (NASDAQ:ARVN) has experienced falling interest from the smart money, it's safe to say that there lies a certain "tier" of hedge funds who sold off their entire stakes last quarter. Interestingly, Jeremy Green's Redmile Group dumped the largest position of the 750 funds monitored by Insider Monkey, worth an estimated $2.2 million in stock. Ken Griffin's fund, Citadel Investment Group, also cut its stock, about $0.7 million worth. These transactions are interesting, as aggregate hedge fund interest was cut by 1 funds last quarter.
Let's now take a look at hedge fund activity in other stocks similar to Arvinas, Inc. (NASDAQ:ARVN). We will take a look at Adverum Biotechnologies, Inc. (NASDAQ:ADVM), UroGen Pharma Ltd. (NASDAQ:URGN), Byline Bancorp, Inc. (NYSE:BY), and Great Lakes Dredge & Dock Corporation (NASDAQ:GLDD). All of these stocks' market caps are similar to ARVN's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ADVM,15,173801,3 URGN,12,146685,-5 BY,5,19950,2 GLDD,22,100002,4 Average,13.5,110110,1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 13.5 hedge funds with bullish positions and the average amount invested in these stocks was $110 million. That figure was $153 million in ARVN's case. Great Lakes Dredge & Dock Corporation (NASDAQ:GLDD) is the most popular stock in this table. On the other hand Byline Bancorp, Inc. (NYSE:BY) is the least popular one with only 5 bullish hedge fund positions. Arvinas, Inc. (NASDAQ:ARVN) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately ARVN wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); ARVN investors were disappointed as the stock returned -2% during the third 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 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far in 2019.
Disclosure: None. This article was originally published at Insider Monkey.