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At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (see why hell is coming). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Revance Therapeutics Inc (NASDAQ:RVNC) at the end of the first quarter and determine whether the smart money was really smart about this stock.
Revance Therapeutics Inc (NASDAQ:RVNC) has experienced a decrease in hedge fund sentiment of late. Our calculations also showed that RVNC isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's monthly stock picks returned 101% since March 2017 and outperformed the S&P 500 ETFs by more than 58 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
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Joseph Edelman of Perceptive Advisors[/caption]
At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a "weekend trading strategy", so we look into his strategy's picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller's investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind let's view the recent hedge fund action regarding Revance Therapeutics Inc (NASDAQ:RVNC).
Hedge fund activity in Revance Therapeutics Inc (NASDAQ:RVNC)
At Q1's end, a total of 11 of the hedge funds tracked by Insider Monkey were long this stock, a change of -31% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards RVNC over the last 18 quarters. With the smart money's sentiment swirling, there exists a few notable hedge fund managers who were adding to their holdings significantly (or already accumulated large positions).
More specifically, Perceptive Advisors was the largest shareholder of Revance Therapeutics Inc (NASDAQ:RVNC), with a stake worth $13.7 million reported as of the end of September. Trailing Perceptive Advisors was Driehaus Capital, which amassed a stake valued at $11 million. Palo Alto Investors, Renaissance Technologies, and Osterweis Capital Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Palo Alto Investors allocated the biggest weight to Revance Therapeutics Inc (NASDAQ:RVNC), around 0.76% of its 13F portfolio. Rhenman & Partners Asset Management is also relatively very bullish on the stock, earmarking 0.46 percent of its 13F equity portfolio to RVNC.
Due to the fact that Revance Therapeutics Inc (NASDAQ:RVNC) has witnessed a decline in interest from the smart money, logic holds that there exists a select few hedge funds that slashed their entire stakes last quarter. At the top of the heap, James E. Flynn's Deerfield Management cut the biggest investment of the "upper crust" of funds watched by Insider Monkey, comprising an estimated $14.6 million in stock, and Anand Parekh's Alyeska Investment Group was right behind this move, as the fund said goodbye to about $6.5 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest was cut by 5 funds last quarter.
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Revance Therapeutics Inc (NASDAQ:RVNC) but similarly valued. These stocks are ePlus Inc. (NASDAQ:PLUS), MaxLinear, Inc. (NYSE:MXL), Community Healthcare Trust Inc (NYSE:CHCT), and Armada Hoffler Properties Inc (NYSE:AHH). This group of stocks' market caps match RVNC's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position PLUS,13,31309,0 MXL,13,28040,-4 CHCT,12,86149,-2 AHH,9,52378,3 Average,11.75,49469,-0.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 11.75 hedge funds with bullish positions and the average amount invested in these stocks was $49 million. That figure was $49 million in RVNC's case. ePlus Inc. (NASDAQ:PLUS) is the most popular stock in this table. On the other hand Armada Hoffler Properties Inc (NYSE:AHH) is the least popular one with only 9 bullish hedge fund positions. Revance Therapeutics Inc (NASDAQ:RVNC) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 12.3% in 2020 through June 30th and still beat the market by 15.5 percentage points. A small number of hedge funds were also right about betting on RVNC as the stock returned 65% during the second quarter and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.