Looking for stocks with high upside potential? Just follow the big players within the hedge fund industry. Why should you do so? Let’s take a brief look at what statistics have to say about hedge funds’ stock picking abilities to illustrate. The Standard and Poor’s 500 Index returned approximately 5.7% in the 12 months ending October 26 (including dividend payments). Conversely, hedge funds’ 30 preferred S&P 500 stocks (as of June 2014) generated a return of 15.1% during the same 12-month period, with 53% of these stock picks outperforming the broader market benchmark. Coincidence? It might happen to be so, but it is unlikely. Our research covering the last 18 years indicates that hedge funds’ stock picks generate superior risk-adjusted returns. That’s why we believe it is wise to check hedge fund activity before you invest your time or your savings on a stock like KalVista Pharmaceuticals, Inc. (NASDAQ:KALV).
KalVista Pharmaceuticals, Inc. (NASDAQ:KALV) investors should pay attention to an increase in hedge fund sentiment lately. KALV was in 12 hedge funds’ portfolios at the end of September. There were 4 hedge funds in our database with KALV holdings at the end of the previous quarter. Our calculations also showed that KALV isn’t among the 30 most popular stocks among hedge funds.
In the financial world there are dozens of gauges shareholders employ to analyze publicly traded companies. Some of the most underrated gauges are hedge fund and insider trading moves. Our researchers have shown that, historically, those who follow the best picks of the elite investment managers can trounce the S&P 500 by a superb margin (see the details here).
We’re going to go over the fresh hedge fund action surrounding KalVista Pharmaceuticals, Inc. (NASDAQ:KALV).
What have hedge funds been doing with KalVista Pharmaceuticals, Inc. (NASDAQ:KALV)?
Heading into the fourth quarter of 2018, a total of 12 of the hedge funds tracked by Insider Monkey were long this stock, a change of 200% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards KALV over the last 13 quarters. With hedgies’ positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).
More specifically, RA Capital Management was the largest shareholder of KalVista Pharmaceuticals, Inc. (NASDAQ:KALV), with a stake worth $31.9 million reported as of the end of September. Trailing RA Capital Management was Deerfield Management, which amassed a stake valued at $14.4 million. Biotechnology Value Fund / BVF Inc, Adage Capital Management, and Ghost Tree Capital were also very fond of the stock, giving the stock large weights in their portfolios.
As industrywide interest jumped, specific money managers have jumped into KalVista Pharmaceuticals, Inc. (NASDAQ:KALV) headfirst. Deerfield Management, managed by James E. Flynn, established the largest position in KalVista Pharmaceuticals, Inc. (NASDAQ:KALV). Deerfield Management had $14.4 million invested in the company at the end of the quarter. Mark Lampert’s Biotechnology Value Fund / BVF Inc also initiated a $13.5 million position during the quarter. The other funds with brand new KALV positions are Phill Gross and Robert Atchinson’s Adage Capital Management, Ken Greenberg and David Kim’s Ghost Tree Capital, and Thomas Steyer’s Farallon Capital.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as KalVista Pharmaceuticals, Inc. (NASDAQ:KALV) but similarly valued. We will take a look at Hexindai Inc. (NASDAQ:HX), Natural Resource Partners LP (NYSE:NRP), RR Donnelley & Sons Company (NASDAQ:RRD), and NI Holdings, Inc. (NASDAQ:NODK). All of these stocks’ market caps are closest to KALV’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| HX | 4 | 1330 | 3 |
| NRP | 5 | 4713 | 1 |
| RRD | 15 | 24582 | 1 |
| NODK | 4 | 23534 | 1 |
| Average | 7 | 13540 | 1.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 7 hedge funds with bullish positions and the average amount invested in these stocks was $14 million. That figure was $84 million in KALV’s case. RR Donnelley & Sons Company (NASDAQ:RRD) is the most popular stock in this table. On the other hand Hexindai Inc. (NASDAQ:HX) is the least popular one with only 4 bullish hedge fund positions. KalVista Pharmaceuticals, Inc. (NASDAQ:KALV) 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. In this regard RRD might be a better candidate to consider a long position.
Disclosure: None. This article was originally published at Insider Monkey.
