Did Hedge Funds Make The Right Call On AVROBIO, Inc. (AVRO) ?

The latest 13F reporting period has come and gone, and Insider Monkey have plowed through 821 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, a week after the market trough. Now, we are almost done with the second quarter. Investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned almost 20% this quarter. In this article you are going to find out whether hedge funds thoughtAVROBIO, Inc. (NASDAQ:AVRO) was a good investment heading into the second quarter and how the stock traded in comparison to the top hedge fund picks.

AVROBIO, Inc. (NASDAQ:AVRO) has experienced an increase in hedge fund interest of late. AVRO was in 17 hedge funds’ portfolios at the end of the first quarter of 2020. There were 14 hedge funds in our database with AVRO holdings at the end of the previous quarter. Our calculations also showed that AVRO 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.

Paul Marshall Marshall Wace

Paul Marshall of Marshall Wace

At Insider Monkey we scour multiple sources to uncover the next great investment idea. With Federal Reserve creating trillions of dollars out of thin air, we believe gold prices will keep increasing. So, we are checking out gold stocks like this small gold mining company. We go through lists like the 10 most profitable companies in America 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. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. Now we’re going to check out the latest hedge fund action encompassing AVROBIO, Inc. (NASDAQ:AVRO).

What does smart money think about AVROBIO, Inc. (NASDAQ:AVRO)?

At the end of the first quarter, a total of 17 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 21% from one quarter earlier. By comparison, 4 hedge funds held shares or bullish call options in AVRO a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is AVRO A Good Stock To Buy?

Among these funds, Citadel Investment Group held the most valuable stake in AVROBIO, Inc. (NASDAQ:AVRO), which was worth $30.4 million at the end of the third quarter. On the second spot was Farallon Capital which amassed $26.8 million worth of shares. Camber Capital Management, Deerfield Management, and Tang 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 Burrage Capital Management allocated the biggest weight to AVROBIO, Inc. (NASDAQ:AVRO), around 3.22% of its 13F portfolio. Tang Capital Management is also relatively very bullish on the stock, designating 2.18 percent of its 13F equity portfolio to AVRO.

As industrywide interest jumped, some big names were leading the bulls’ herd. Holocene Advisors, managed by Brandon Haley, established the most outsized position in AVROBIO, Inc. (NASDAQ:AVRO). Holocene Advisors had $7.6 million invested in the company at the end of the quarter. Richard Driehaus’s Driehaus Capital also initiated a $3.8 million position during the quarter. The other funds with brand new AVRO positions are Christiana Goh Bardon’s Burrage Capital Management, Simon Sadler’s Segantii Capital, and Brad Farber’s Atika Capital.

Let’s go over hedge fund activity in other stocks similar to AVROBIO, Inc. (NASDAQ:AVRO). These stocks are Big Lots, Inc. (NYSE:BIG), Portola Pharmaceuticals Inc (NASDAQ:PTLA), Compugen Ltd. (NASDAQ:CGEN), and Groupon Inc (NASDAQ:GRPN). This group of stocks’ market valuations are similar to AVRO’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
BIG 15 75414 -9
PTLA 17 61104 -10
CGEN 8 44171 2
GRPN 18 74380 -8
Average 14.5 63767 -6.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 14.5 hedge funds with bullish positions and the average amount invested in these stocks was $64 million. That figure was $168 million in AVRO’s case. Groupon Inc (NASDAQ:GRPN) is the most popular stock in this table. On the other hand Compugen Ltd. (NASDAQ:CGEN) is the least popular one with only 8 bullish hedge fund positions. AVROBIO, Inc. (NASDAQ:AVRO) 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 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 18.6% in 2020 through July 27th but beat the market by 17.1 percentage points. Unfortunately AVRO wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on AVRO were disappointed as the stock returned 24.7% during the same time 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 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.

Follow Tectonic Therapeutic Inc. (NASDAQ:TECX)

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