Hedge funds and other investment firms run by legendary investors like Israel Englander, Jeffrey Talpins and Ray Dalio are entrusted to manage billions of dollars of accredited investors' money because they are without peer in the resources they use to identify the best investments for their chosen investment horizon. Moreover, they are more willing to invest a greater amount of their resources in small-cap stocks than big brokerage houses, and this is often where they generate their outperformance, which is why we pay particular attention to their best ideas in this space.
Kura Oncology, Inc. (NASDAQ:KURA) was in 15 hedge funds' portfolios at the end of the fourth quarter of 2018. KURA has experienced a decrease in hedge fund interest lately. There were 20 hedge funds in our database with KURA positions at the end of the previous quarter. Our calculations also showed that KURA isn't among the 30 most popular stocks among hedge funds.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 32 percentage points since May 2014 through March 12, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.5% through March 12, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
We're going to view the fresh hedge fund action surrounding Kura Oncology, Inc. (NASDAQ:KURA).
What have hedge funds been doing with Kura Oncology, Inc. (NASDAQ:KURA)?
At the end of the fourth quarter, a total of 15 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -25% from one quarter earlier. On the other hand, there were a total of 16 hedge funds with a bullish position in KURA a year ago. With the smart money's positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).
More specifically, EcoR1 Capital was the largest shareholder of Kura Oncology, Inc. (NASDAQ:KURA), with a stake worth $74.1 million reported as of the end of December. Trailing EcoR1 Capital was Biotechnology Value Fund / BVF Inc, which amassed a stake valued at $39 million. Great Point Partners, Partner Fund Management, and Cormorant Asset Management were also very fond of the stock, giving the stock large weights in their portfolios.
Since Kura Oncology, Inc. (NASDAQ:KURA) has faced declining sentiment from hedge fund managers, it's easy to see that there exists a select few hedgies who sold off their full holdings by the end of the third quarter. Interestingly, Kris Jenner, Gordon Bussard, Graham McPhail's Rock Springs Capital Management dumped the biggest stake of the 700 funds watched by Insider Monkey, comprising about $7.1 million in stock. Steve Cohen's fund, Point72 Asset Management, also dumped its stock, about $6.6 million worth. These moves are interesting, as aggregate hedge fund interest dropped by 5 funds by the end of the third quarter.
Let's also examine hedge fund activity in other stocks similar to Kura Oncology, Inc. (NASDAQ:KURA). These stocks are ANI Pharmaceuticals Inc (NASDAQ:ANIP), Community Healthcare Trust Inc (NYSE:CHCT), Myers Industries, Inc. (NYSE:MYE), and Controladora Vuela Co Avcn SA CV (NYSE:VLRS). This group of stocks' market valuations are closest to KURA's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ANIP,13,46690,-4 CHCT,9,63252,0 MYE,8,84723,0 VLRS,7,48641,2 Average,9.25,60827,-0.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 9.25 hedge funds with bullish positions and the average amount invested in these stocks was $61 million. That figure was $187 million in KURA's case. ANI Pharmaceuticals Inc (NASDAQ:ANIP) is the most popular stock in this table. On the other hand Controladora Vuela Co Avcn SA CV (NYSE:VLRS) is the least popular one with only 7 bullish hedge fund positions. Compared to these stocks Kura Oncology, Inc. (NASDAQ:KURA) is more popular among hedge funds. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Unfortunately KURA wasn't nearly as popular as these 15 stock and hedge funds that were betting on KURA were disappointed as the stock returned 5.3% and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 15 most popular stocks) among hedge funds as 13 of these stocks already outperformed the market this year.
Disclosure: None. This article was originally published at Insider Monkey.