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Were Hedge Funds Right About Dumping Clovis Oncology Inc (CLVS)?

Reymerlyn Martin

With the first-quarter round of 13F filings behind us it is time to take a look at the stocks in which some of the best money managers in the world preferred to invest or sell heading into the second quarter. One of these stocks was Clovis Oncology Inc (NASDAQ:CLVS).

Clovis Oncology Inc (NASDAQ:CLVS) was in 24 hedge funds' portfolios at the end of the second quarter of 2019. CLVS has experienced a decrease in activity from the world's largest hedge funds recently. There were 29 hedge funds in our database with CLVS positions at the end of the previous quarter. Our calculations also showed that CLVS isn't among the 30 most popular stocks among hedge funds (see the video below). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

5 Most Popular Stocks Among Hedge Funds

At the moment there are a multitude of signals investors have at their disposal to size up their stock investments. A duo of the best signals are hedge fund and insider trading moves. Our experts have shown that, historically, those who follow the best picks of the best fund managers can outclass their index-focused peers by a healthy margin (see the details here).

William Leland Edwards of Palo Alto Investors

n addition to following the biggest hedge funds for investment ideas, we also share stock pitches from conferences, investor letters and other sources  like this one where the fund manager is talking about two under the radar 1000% return potential stocks: first one in internet infrastructure and the second in the heart of advertising market. We use hedge fund buy/sell signals to determine whether to conduct in-depth analysis of these stock ideas which take days. We're going to check out the recent hedge fund action surrounding Clovis Oncology Inc (NASDAQ:CLVS).

How are hedge funds trading Clovis Oncology Inc (NASDAQ:CLVS)?

At the end of the second quarter, a total of 24 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -17% from the first quarter of 2019. On the other hand, there were a total of 35 hedge funds with a bullish position in CLVS a year ago. With the smart money's positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were adding to their holdings significantly (or already accumulated large positions).

CLVS_oct2019

More specifically, Palo Alto Investors was the largest shareholder of Clovis Oncology Inc (NASDAQ:CLVS), with a stake worth $76.5 million reported as of the end of March. Trailing Palo Alto Investors was Redmile Group, which amassed a stake valued at $51.5 million. Armistice Capital, OrbiMed Advisors, and Healthcor Management LP were also very fond of the stock, giving the stock large weights in their portfolios.

Since Clovis Oncology Inc (NASDAQ:CLVS) has faced a decline in interest from the aggregate hedge fund industry, logic holds that there exists a select few hedgies who sold off their full holdings heading into Q3. Intriguingly, Steven Boyd's Armistice Capital said goodbye to the largest stake of the "upper crust" of funds tracked by Insider Monkey, valued at about $52.1 million in stock. Stephen DuBois's fund, Camber Capital Management, also cut its stock, about $37.2 million worth. These moves are important to note, as aggregate hedge fund interest dropped by 5 funds heading into Q3.

Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Clovis Oncology Inc (NASDAQ:CLVS) but similarly valued. We will take a look at Cooper-Standard Holdings Inc (NYSE:CPS), Monarch Casino & Resort, Inc. (NASDAQ:MCRI), EMC Insurance Group Inc. (NASDAQ:EMCI), and Carolina Financial Corporation (NASDAQ:CARO). This group of stocks' market valuations resemble CLVS's market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CPS,15,42030,0 MCRI,8,118665,-2 EMCI,5,16102,-1 CARO,8,51050,1 Average,9,56962,-0.5 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 9 hedge funds with bullish positions and the average amount invested in these stocks was $57 million. That figure was $268 million in CLVS's case. Cooper-Standard Holdings Inc (NYSE:CPS) is the most popular stock in this table. On the other hand EMC Insurance Group Inc. (NASDAQ:EMCI) is the least popular one with only 5 bullish hedge fund positions. Compared to these stocks Clovis Oncology Inc (NASDAQ:CLVS) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately CLVS wasn't nearly as popular as these 20 stocks and hedge funds that were betting on CLVS were disappointed as the stock returned -73.6% during the third 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 many of these stocks already outperformed the market in Q3.

Disclosure: None. This article was originally published at Insider Monkey.

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