At Insider Monkey, we pore over the filings of nearly 750 top investment firms every quarter, a process we have now completed for the latest reporting period. The data we've gathered as a result gives us access to a wealth of collective knowledge based on these firms' portfolio holdings as of March 31. In this article, we will use that wealth of knowledge to determine whether or not Dicerna Pharmaceuticals Inc (NASDAQ:DRNA) makes for a good investment right now.
Dicerna Pharmaceuticals Inc (NASDAQ:DRNA) has experienced a decrease in hedge fund interest lately. DRNA was in 19 hedge funds' portfolios at the end of March. There were 20 hedge funds in our database with DRNA holdings at the end of the previous quarter. Our calculations also showed that drna isn't among the 30 most popular stocks among hedge funds.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 market by 40 percentage points since May 2014 through May 30, 2019 (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. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.
Let's take a peek at the recent hedge fund action regarding Dicerna Pharmaceuticals Inc (NASDAQ:DRNA).
What does the smart money think about Dicerna Pharmaceuticals Inc (NASDAQ:DRNA)?
At the end of the first quarter, a total of 19 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -5% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards DRNA over the last 15 quarters. With the smart money's sentiment swirling, there exists a select group of notable hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).
According to Insider Monkey's hedge fund database, Bridger Management, managed by Roberto Mignone, holds the number one position in Dicerna Pharmaceuticals Inc (NASDAQ:DRNA). Bridger Management has a $69.9 million position in the stock, comprising 5.5% of its 13F portfolio. Sitting at the No. 2 spot is EcoR1 Capital, managed by Oleg Nodelman, which holds a $48.6 million position; 4.5% of its 13F portfolio is allocated to the stock. Some other peers that are bullish contain Phill Gross and Robert Atchinson's Adage Capital Management, Peter Kolchinsky's RA Capital Management and Ken Griffin's Citadel Investment Group.
Due to the fact that Dicerna Pharmaceuticals Inc (NASDAQ:DRNA) has witnessed falling interest from the smart money, we can see that there is a sect of money managers that decided to sell off their positions entirely heading into Q3. It's worth mentioning that Bihua Chen's Cormorant Asset Management dumped the largest investment of the 700 funds monitored by Insider Monkey, worth close to $37.2 million in stock. Ken Greenberg and David Kim's fund, Ghost Tree Capital, also said goodbye to its stock, about $13.4 million worth. These bearish behaviors are interesting, as total hedge fund interest fell by 1 funds heading into Q3.
Let's go over hedge fund activity in other stocks similar to Dicerna Pharmaceuticals Inc (NASDAQ:DRNA). These stocks are The St. Joe Company (NYSE:JOE), TPI Composites, Inc. (NASDAQ:TPIC), Celestica Inc. (NYSE:CLS), and BJ's Restaurants, Inc. (NASDAQ:BJRI). All of these stocks' market caps are similar to DRNA's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position JOE,13,484514,1 TPIC,19,137247,6 CLS,15,81881,1 BJRI,19,150999,-2 Average,16.5,213660,1.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 16.5 hedge funds with bullish positions and the average amount invested in these stocks was $214 million. That figure was $299 million in DRNA's case. TPI Composites, Inc. (NASDAQ:TPIC) is the most popular stock in this table. On the other hand The St. Joe Company (NYSE:JOE) is the least popular one with only 13 bullish hedge fund positions. Dicerna Pharmaceuticals Inc (NASDAQ:DRNA) is not the most popular stock in this group but hedge fund interest is still above average. 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 20 most popular stocks among hedge funds returned 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Unfortunately DRNA wasn't nearly as popular as these 20 stocks and hedge funds that were betting on DRNA were disappointed as the stock returned -12.9% during the same period 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 13 of these stocks already outperformed the market so far in Q2.
Disclosure: None. This article was originally published at Insider Monkey.