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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 have processed the filings of the more than 866 world-class investment firms that we track and now have access to the collective wisdom contained in these filings, which are based on their March 31st holdings, data that is available nowhere else. Should you consider Arrowhead Pharmaceuticals Inc. (NASDAQ:ARWR) for your portfolio? We'll look to this invaluable collective wisdom for the answer.
Is Arrowhead Pharmaceuticals Inc. (NASDAQ:ARWR) the right pick for your portfolio? Hedge funds were in a pessimistic mood. The number of long hedge fund bets retreated by 4 lately. Arrowhead Pharmaceuticals Inc. (NASDAQ:ARWR) was in 20 hedge funds' portfolios at the end of March. The all time high for this statistic is 26. Our calculations also showed that ARWR isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings).
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 115 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.
Joseph Edelman of Perceptive Advisors
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, Chuck Schumer recently stated that marijuana legalization will be a Senate priority. So, we are checking out this under the radar stock that will benefit from this. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. Now let's review the key hedge fund action regarding Arrowhead Pharmaceuticals Inc. (NASDAQ:ARWR).
Do Hedge Funds Think ARWR Is A Good Stock To Buy Now?
At the end of the first quarter, a total of 20 of the hedge funds tracked by Insider Monkey were long this stock, a change of -17% from the fourth quarter of 2020. By comparison, 22 hedge funds held shares or bullish call options in ARWR a year ago. With hedge funds' positions undergoing their usual ebb and flow, there exists an "upper tier" of notable hedge fund managers who were adding to their stakes considerably (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Joseph Edelman's Perceptive Advisors has the biggest position in Arrowhead Pharmaceuticals Inc. (NASDAQ:ARWR), worth close to $27.1 million, amounting to 0.3% of its total 13F portfolio. Sitting at the No. 2 spot is Aquilo Capital Management, managed by Marc Schneidman, which holds a $27.1 million position; the fund has 4.9% of its 13F portfolio invested in the stock. Other hedge funds and institutional investors that hold long positions include Ken Griffin's Citadel Investment Group, Renaissance Technologies and Farallon Capital. In terms of the portfolio weights assigned to each position Aquilo Capital Management allocated the biggest weight to Arrowhead Pharmaceuticals Inc. (NASDAQ:ARWR), around 4.89% of its 13F portfolio. Acuta Capital Partners is also relatively very bullish on the stock, setting aside 2.58 percent of its 13F equity portfolio to ARWR.
Judging by the fact that Arrowhead Pharmaceuticals Inc. (NASDAQ:ARWR) has experienced declining sentiment from the smart money, it's easy to see that there lies a certain "tier" of fund managers who sold off their positions entirely last quarter. It's worth mentioning that Paul Marshall and Ian Wace's Marshall Wace LLP dumped the largest position of all the hedgies tracked by Insider Monkey, worth about $22.1 million in stock. Principal Global Investors's fund, Columbus Circle Investors, also cut its stock, about $10.5 million worth. These moves are important to note, as aggregate hedge fund interest was cut by 4 funds last quarter.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Arrowhead Pharmaceuticals Inc. (NASDAQ:ARWR) but similarly valued. These stocks are Redfin Corporation (NASDAQ:RDFN), Hanesbrands Inc. (NYSE:HBI), Ballard Power Systems Inc. (NASDAQ:BLDP), MINISO Group Holding Limited (NYSE:MNSO), GW Pharmaceuticals plc (NASDAQ:GWPH), Post Holdings Inc (NYSE:POST), and Synovus Financial Corp. (NYSE:SNV). This group of stocks' market caps resemble ARWR's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position RDFN,18,434551,-3 HBI,32,977516,5 BLDP,18,125641,-2 MNSO,12,87616,-6 GWPH,40,2735520,23 POST,33,1567551,6 SNV,30,264409,-3 Average,26.1,884686,2.9 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 26.1 hedge funds with bullish positions and the average amount invested in these stocks was $885 million. That figure was $152 million in ARWR's case. GW Pharmaceuticals plc (NASDAQ:GWPH) is the most popular stock in this table. On the other hand MINISO Group Holding Limited (NYSE:MNSO) is the least popular one with only 12 bullish hedge fund positions. Arrowhead Pharmaceuticals Inc. (NASDAQ:ARWR) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for ARWR is 38.4. 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 negative signal and we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 23.8% in 2021 through July 16th and surpassed the market again by 7.7 percentage points. Unfortunately ARWR wasn't nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); ARWR investors were disappointed as the stock returned -4.3% since the end of March (through 7/16) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2021.
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Disclosure: None. This article was originally published at Insider Monkey.