At Insider Monkey we track the activity of some of the best-performing hedge funds like Appaloosa Management, Baupost, and Tiger Global because we determined that some of the stocks that they are collectively bullish on can help us generate returns above the broader indices. Out of thousands of stocks that hedge funds invest in, small-caps can provide the best returns over the long term due to the fact that these companies are less efficiently priced and are usually under the radars of mass-media, analysts and dumb money. This is why we follow the smart money moves in the small-cap space.
Innoviva, Inc. (NASDAQ:INVA) shares haven't seen a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 22 hedge funds' portfolios at the end of the fourth quarter of 2018. At the end of this article we will also compare INVA to other stocks including MSG Networks Inc (NYSE:MSGN), Oasis Petroleum Inc. (NYSE:OAS), and Covanta Holding Corporation (NYSE:CVA) to get a better sense of its popularity.
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' 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.
Let's take a look at the key hedge fund action surrounding Innoviva, Inc. (NASDAQ:INVA).
What does the smart money think about Innoviva, Inc. (NASDAQ:INVA)?
At the end of the fourth quarter, a total of 22 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the second quarter of 2018. Below, you can check out the change in hedge fund sentiment towards INVA over the last 14 quarters. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Renaissance Technologies was the largest shareholder of Innoviva, Inc. (NASDAQ:INVA), with a stake worth $106.7 million reported as of the end of September. Trailing Renaissance Technologies was Sarissa Capital Management, which amassed a stake valued at $88.1 million. D E Shaw, GLG Partners, and Winton Capital Management were also very fond of the stock, giving the stock large weights in their portfolios.
Due to the fact that Innoviva, Inc. (NASDAQ:INVA) has faced declining sentiment from the entirety of the hedge funds we track, it's easy to see that there was a specific group of money managers that decided to sell off their entire stakes heading into Q3. Intriguingly, Mitchell Blutt's Consonance Capital Management cut the largest stake of the 700 funds watched by Insider Monkey, worth close to $15.3 million in stock. Michael Platt and William Reeves's fund, BlueCrest Capital Mgmt., also cut its stock, about $0.8 million worth. These bearish behaviors are interesting, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Innoviva, Inc. (NASDAQ:INVA) but similarly valued. These stocks are MSG Networks Inc (NYSE:MSGN), Oasis Petroleum Inc. (NYSE:OAS), Covanta Holding Corporation (NYSE:CVA), and Granite Real Estate Investment Trust (NYSE:GRP). This group of stocks' market values match INVA's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position MSGN,20,264027,-3 OAS,31,298063,-2 CVA,20,65967,1 GRP,11,90225,1 Average,20.5,179571,-0.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 20.5 hedge funds with bullish positions and the average amount invested in these stocks was $180 million. That figure was $312 million in INVA's case. Oasis Petroleum Inc. (NYSE:OAS) is the most popular stock in this table. On the other hand Granite Real Estate Investment Trust (NYSE:GRP) is the least popular one with only 11 bullish hedge fund positions. Innoviva, Inc. (NASDAQ:INVA) 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 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 INVA wasn't nearly as popular as these 15 stock and hedge funds that were betting on INVA were disappointed as the stock returned -23% 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.