Is Dynavax Technologies Corporation (NASDAQ:DVAX) 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.
Dynavax Technologies Corporation (NASDAQ:DVAX) was in 16 hedge funds' portfolios at the end of March. DVAX investors should be aware of a decrease in hedge fund sentiment recently. There were 18 hedge funds in our database with DVAX positions at the end of the previous quarter. Our calculations also showed that dvax 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 glance at the recent hedge fund action regarding Dynavax Technologies Corporation (NASDAQ:DVAX).
What does smart money think about Dynavax Technologies Corporation (NASDAQ:DVAX)?
At the end of the first quarter, a total of 16 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -11% from the previous quarter. By comparison, 18 hedge funds held shares or bullish call options in DVAX a year ago. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Rima Senvest Management held the most valuable stake in Dynavax Technologies Corporation (NASDAQ:DVAX), which was worth $24 million at the end of the first quarter. On the second spot was D E Shaw which amassed $17 million worth of shares. Moreover, Millennium Management, Brookside Capital, and Citadel Investment Group were also bullish on Dynavax Technologies Corporation (NASDAQ:DVAX), allocating a large percentage of their portfolios to this stock.
Due to the fact that Dynavax Technologies Corporation (NASDAQ:DVAX) has experienced falling interest from hedge fund managers, it's safe to say that there were a few funds that slashed their positions entirely heading into Q3. At the top of the heap, Arthur B Cohen and Joseph Healey's Healthcor Management LP said goodbye to the largest stake of the 700 funds tracked by Insider Monkey, valued at about $38.6 million in stock. Oleg Nodelman's fund, EcoR1 Capital, also dropped its stock, about $1.3 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest was cut by 2 funds heading into Q3.
Let's now review hedge fund activity in other stocks similar to Dynavax Technologies Corporation (NASDAQ:DVAX). These stocks are Bonanza Creek Energy Inc (NYSE:BCEI), CURO Group Holdings Corp. (NYSE:CURO), HighPoint Resources Corporation (NYSE:HPR), and Hometrust Bancshares Inc (NASDAQ:HTBI). This group of stocks' market caps resemble DVAX's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position BCEI,16,158718,2 CURO,17,85677,7 HPR,14,59728,0 HTBI,12,66553,3 Average,14.75,92669,3 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 14.75 hedge funds with bullish positions and the average amount invested in these stocks was $93 million. That figure was $85 million in DVAX's case. CURO Group Holdings Corp. (NYSE:CURO) is the most popular stock in this table. On the other hand Hometrust Bancshares Inc (NASDAQ:HTBI) is the least popular one with only 12 bullish hedge fund positions. Dynavax Technologies Corporation (NASDAQ:DVAX) 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 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. Unfortunately DVAX wasn't nearly as popular as these 20 stocks and hedge funds that were betting on DVAX were disappointed as the stock returned -45.6% 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.