Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed in recent years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets hoping that they will outperform the broader market. Our research shows that certain hedge funds do have great stock picking skills (and we can identify these hedge funds in advance pretty accurately), so let’s take a glance at the smart money sentiment towards Revance Therapeutics Inc (NASDAQ:RVNC).
Revance Therapeutics Inc (NASDAQ:RVNC) has experienced an increase in enthusiasm from smart money lately. Our calculations also showed that RVNC isn't among the 30 most popular stocks among hedge funds.
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' 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.
We're going to take a look at the key hedge fund action encompassing Revance Therapeutics Inc (NASDAQ:RVNC).
What have hedge funds been doing with Revance Therapeutics Inc (NASDAQ:RVNC)?
At Q1's end, a total of 12 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 33% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in RVNC over the last 15 quarters. With hedgies' positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).
Among these funds, Renaissance Technologies held the most valuable stake in Revance Therapeutics Inc (NASDAQ:RVNC), which was worth $14.2 million at the end of the first quarter. On the second spot was Sio Capital which amassed $4 million worth of shares. Moreover, Citadel Investment Group, MFN Partners, and Two Sigma Advisors were also bullish on Revance Therapeutics Inc (NASDAQ:RVNC), allocating a large percentage of their portfolios to this stock.
Consequently, key money managers have been driving this bullishness. Two Sigma Advisors, managed by John Overdeck and David Siegel, assembled the most outsized position in Revance Therapeutics Inc (NASDAQ:RVNC). Two Sigma Advisors had $0.6 million invested in the company at the end of the quarter. Paul Marshall and Ian Wace's Marshall Wace LLP also initiated a $0.5 million position during the quarter. The other funds with new positions in the stock are Ken Griffin's Citadel Investment Group and Mike Vranos's Ellington.
Let's check out hedge fund activity in other stocks - not necessarily in the same industry as Revance Therapeutics Inc (NASDAQ:RVNC) but similarly valued. These stocks are Northfield Bancorp, Inc. (Staten Island, NY) (NASDAQ:NFBK), US Concrete Inc (NASDAQ:USCR), EMC Insurance Group Inc. (NASDAQ:EMCI), and Organogenesis Holdings Inc. (NASDAQ:ORGO). All of these stocks' market caps are similar to RVNC's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position NFBK,5,32141,1 USCR,17,76849,-1 EMCI,6,27213,1 ORGO,4,19046,-4 Average,8,38812,-0.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 8 hedge funds with bullish positions and the average amount invested in these stocks was $39 million. That figure was $25 million in RVNC's case. US Concrete Inc (NASDAQ:USCR) is the most popular stock in this table. On the other hand Organogenesis Holdings Inc. (NASDAQ:ORGO) is the least popular one with only 4 bullish hedge fund positions. Revance Therapeutics Inc (NASDAQ:RVNC) 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 RVNC wasn't nearly as popular as these 20 stocks and hedge funds that were betting on RVNC were disappointed as the stock returned -26.6% 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.