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Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track nearly 817 active prominent money managers and analyze their quarterly 13F filings. The stocks that are heavily bought by hedge funds historically outperformed the market, though there is no shortage of high profile failures like hedge funds' 2018 losses in Facebook and Apple. Let’s take a closer look at what the funds we track think about Revance Therapeutics Inc (NASDAQ:RVNC) in this article.
Is RVNC a good stock to buy now? Revance Therapeutics Inc (NASDAQ:RVNC) investors should be aware of a decrease in hedge fund interest in recent months. Revance Therapeutics Inc (NASDAQ:RVNC) was in 13 hedge funds' portfolios at the end of September. The all time high for this statistic is 16. Our calculations also showed that RVNC isn't among the 30 most popular stocks among hedge funds (click for Q3 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 113% since March 2017 and outperformed the S&P 500 ETFs by more than 66 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.
Henrik Rhenman of Rhenman & Partners Asset Management
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. With all of this in mind we're going to take a look at the recent hedge fund action surrounding Revance Therapeutics Inc (NASDAQ:RVNC).
Do Hedge Funds Think RVNC Is A Good Stock To Buy Now?
At the end of September, a total of 13 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -7% from the previous quarter. The graph below displays the number of hedge funds with bullish position in RVNC over the last 21 quarters. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Revance Therapeutics Inc (NASDAQ:RVNC) was held by Palo Alto Investors, which reported holding $50.2 million worth of stock at the end of September. It was followed by Polar Capital with a $28.1 million position. Other investors bullish on the company included Driehaus Capital, Citadel Investment Group, and Rhenman & Partners Asset Management. In terms of the portfolio weights assigned to each position Palo Alto Investors allocated the biggest weight to Revance Therapeutics Inc (NASDAQ:RVNC), around 2.75% of its 13F portfolio. Soleus Capital is also relatively very bullish on the stock, setting aside 0.55 percent of its 13F equity portfolio to RVNC.
Since Revance Therapeutics Inc (NASDAQ:RVNC) has experienced a decline in interest from the entirety of the hedge funds we track, logic holds that there was a specific group of hedge funds that decided to sell off their entire stakes heading into Q4. At the top of the heap, Joseph Edelman's Perceptive Advisors dropped the biggest investment of all the hedgies tracked by Insider Monkey, totaling close to $1.6 million in stock. Efrem Kamen's fund, Pura Vida Investments, also dropped its stock, about $1 million worth. These transactions are important to note, as aggregate hedge fund interest dropped by 1 funds heading into Q4.
Let's now take a look at hedge fund activity in other stocks similar to Revance Therapeutics Inc (NASDAQ:RVNC). These stocks are Cavco Industries, Inc. (NASDAQ:CVCO), Progress Software Corporation (NASDAQ:PRGS), Prelude Therapeutics Incorporated (NASDAQ:PRLD), International Bancshares Corp (NASDAQ:IBOC), Walker & Dunlop Inc. (NYSE:WD), Madison Square Garden Entertainment Corp. (NYSE:MSGE), and Veoneer, Inc. (NASDAQ:VNE). This group of stocks' market valuations are similar to RVNC's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CVCO,22,160263,-1 PRGS,21,195226,-6 PRLD,15,839468,15 IBOC,19,77344,2 WD,17,72026,-1 MSGE,34,376412,-4 VNE,10,128887,-4 Average,19.7,264232,0.1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 19.7 hedge funds with bullish positions and the average amount invested in these stocks was $264 million. That figure was $119 million in RVNC's case. Madison Square Garden Entertainment Corp. (NYSE:MSGE) is the most popular stock in this table. On the other hand Veoneer, Inc. (NASDAQ:VNE) is the least popular one with only 10 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 overall hedge fund sentiment score for RVNC is 34.6. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. This is a slightly negative signal and 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 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 32.9% in 2020 through December 8th and surpassed the market again by 16.2 percentage points. Unfortunately RVNC wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); RVNC investors were disappointed as the stock returned -2.3% since the end of September (through 12/8) 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 most of these stocks already outperformed the market in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.