Did Hedge Funds Make The Right Call On Kura Oncology, Inc. (KURA) ?

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the first quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 4.5 years and analyze what the smart money thinks of Kura Oncology, Inc. (NASDAQ:KURA) based on that data and determine whether they were really smart about the stock.

Is Kura Oncology, Inc. (NASDAQ:KURA) a buy here? The best stock pickers were getting more optimistic. The number of bullish hedge fund positions went up by 1 in recent months. Our calculations also showed that KURA 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). KURA was in 23 hedge funds’ portfolios at the end of the first quarter of 2020. There were 22 hedge funds in our database with KURA positions at the end of the previous quarter.

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.

Oleg Nodelman EcoR1 Capital

Oleg Nodelman of EcoR1 Capital

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, on one site we found out that NBA champion Isiah Thomas is now the CEO of this cannabis company. The same site also talks about a snack manufacturer that’s growing at 30% annually. 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. Hedge fund sentiment towards Tesla reached its all time high at the end of 2019 and Tesla shares more than tripled this year. We are trying to identify other EV revolution winners, so if you have any good ideas send us an email. Keeping this in mind let’s analyze the recent hedge fund action encompassing Kura Oncology, Inc. (NASDAQ:KURA).

How are hedge funds trading Kura Oncology, Inc. (NASDAQ:KURA)?

At the end of the first quarter, a total of 23 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 5% from the fourth quarter of 2019. By comparison, 17 hedge funds held shares or bullish call options in KURA a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, EcoR1 Capital was the largest shareholder of Kura Oncology, Inc. (NASDAQ:KURA), with a stake worth $34.9 million reported as of the end of September. Trailing EcoR1 Capital was Biotechnology Value Fund / BVF Inc, which amassed a stake valued at $24.2 million. Prosight Capital, Cormorant Asset Management, and Ikarian Capital 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 Prosight Capital allocated the biggest weight to Kura Oncology, Inc. (NASDAQ:KURA), around 6.74% of its 13F portfolio. EcoR1 Capital is also relatively very bullish on the stock, setting aside 3.65 percent of its 13F equity portfolio to KURA.

Consequently, key hedge funds have jumped into Kura Oncology, Inc. (NASDAQ:KURA) headfirst. Ikarian Capital, managed by Neil Shahrestani, initiated the most valuable position in Kura Oncology, Inc. (NASDAQ:KURA). Ikarian Capital had $7.6 million invested in the company at the end of the quarter. Manfred Yu’s Acuta Capital Partners also made a $2 million investment in the stock during the quarter. The following funds were also among the new KURA investors: Renaissance Technologies and Mike Vranos’s Ellington.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Kura Oncology, Inc. (NASDAQ:KURA) but similarly valued. These stocks are Brinker International, Inc. (NYSE:EAT), Apollo Investment Corp. (NASDAQ:AINV), Golden Ocean Group Ltd (NASDAQ:GOGL), and Global Medical REIT Inc. (NYSE:GMRE). This group of stocks’ market valuations are similar to KURA’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
EAT 16 47292 -5
AINV 10 19432 1
GOGL 8 140504 -1
GMRE 10 13400 1
Average 11 55157 -1

View table here if you experience formatting issues.

As you can see these stocks had an average of 11 hedge funds with bullish positions and the average amount invested in these stocks was $55 million. That figure was $122 million in KURA’s case. Brinker International, Inc. (NYSE:EAT) is the most popular stock in this table. On the other hand Golden Ocean Group Ltd (NASDAQ:GOGL) is the least popular one with only 8 bullish hedge fund positions. Compared to these stocks Kura Oncology, Inc. (NASDAQ:KURA) is more popular among hedge funds. 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 returned 12.3% in 2020 through June 30th but still managed to beat the market by 15.5 percentage points. Hedge funds were also right about betting on KURA as the stock returned 63.8% in Q2 and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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