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Like everyone else, elite investors make mistakes. Some of their top consensus picks, such as Amazon, Facebook and Alibaba, have not done well in Q4 of 2018 due to various reasons. Nevertheless, the data show elite investors' consensus picks have done well on average over the long-term. The top 20 stocks among hedge funds beat the S&P 500 Index ETFs by nearly 10 percentage points during the first 11 months of 2019. Because their consensus picks have done well, we pay attention to what elite funds think before doing extensive research on a stock. In this article, we take a closer look at Savara, Inc. (NASDAQ:SVRA) from the perspective of those elite funds.
Hedge fund interest in Savara, Inc. (NASDAQ:SVRA) shares was flat at the end of last quarter. This is usually a negative indicator. The level and the change in hedge fund popularity aren't the only variables you need to analyze to decipher hedge funds' perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That's why at the end of this article we will examine companies such as Neoleukin Therapeutics, Inc. (NASDAQ:NLTX), Guaranty Federal Bancshares, Inc. (NASDAQ:GFED), and Chembio Diagnostics Inc (NASDAQ:CEMI) to gather more data points. Our calculations also showed that SVRA isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
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 Russell 2000 ETFs by 40 percentage points since May 2014 (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 27.8% through November 21, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
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Phill Gross of Adage Capital Management[/caption]
We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius’ weekly trade ideas. This December we recommended Adams Energy based on an under-the-radar fund manager’s investor letter and the stock gained 20 percent. Let's take a glance at the new hedge fund action encompassing Savara, Inc. (NASDAQ:SVRA).
How are hedge funds trading Savara, Inc. (NASDAQ:SVRA)?
At Q3's end, a total of 10 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from one quarter earlier. On the other hand, there were a total of 13 hedge funds with a bullish position in SVRA a year ago. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Farallon Capital held the most valuable stake in Savara, Inc. (NASDAQ:SVRA), which was worth $9.3 million at the end of the third quarter. On the second spot was Consonance Capital Management which amassed $4.2 million worth of shares. Sectoral Asset Management, Adage Capital Management, and Eversept Partners 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 Consonance Capital Management allocated the biggest weight to Savara, Inc. (NASDAQ:SVRA), around 0.41% of its 13F portfolio. Sectoral Asset Management is also relatively very bullish on the stock, setting aside 0.32 percent of its 13F equity portfolio to SVRA.
Because Savara, Inc. (NASDAQ:SVRA) has experienced falling interest from the entirety of the hedge funds we track, we can see that there were a few hedge funds that decided to sell off their positions entirely heading into Q4. Interestingly, Michael Castor's Sio Capital dropped the biggest position of all the hedgies watched by Insider Monkey, worth an estimated $0.9 million in call options, and Ken Griffin's Citadel Investment Group was right behind this move, as the fund sold off about $0.5 million worth. These moves are intriguing to say the least, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let's also examine hedge fund activity in other stocks similar to Savara, Inc. (NASDAQ:SVRA). These stocks are Neoleukin Therapeutics, Inc. (NASDAQ:NLTX), Guaranty Federal Bancshares, Inc. (NASDAQ:GFED), Chembio Diagnostics Inc (NASDAQ:CEMI), and Steel Connect, Inc. (NASDAQ:STCN). This group of stocks' market values are closest to SVRA's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position NLTX,9,45869,1 GFED,2,3370,0 CEMI,2,11357,-2 STCN,5,37813,1 Average,4.5,24602,0 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 4.5 hedge funds with bullish positions and the average amount invested in these stocks was $25 million. That figure was $18 million in SVRA's case. Neoleukin Therapeutics, Inc. (NASDAQ:NLTX) is the most popular stock in this table. On the other hand Guaranty Federal Bancshares, Inc. (NASDAQ:GFED) is the least popular one with only 2 bullish hedge fund positions. Compared to these stocks Savara, Inc. (NASDAQ:SVRA) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately SVRA wasn't nearly as popular as these 20 stocks and hedge funds that were betting on SVRA were disappointed as the stock returned -52.5% during the first two months of the fourth quarter 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 70 percent of these stocks already outperformed the market in Q4.
Disclosure: None. This article was originally published at Insider Monkey.