Hedge Funds Are Dumping Aravive, Inc. (ARAV)

In this article you are going to find out whether hedge funds think Aravive, Inc. (NASDAQ:ARAV) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It’s not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.

Aravive, Inc. (NASDAQ:ARAV) has experienced a decrease in hedge fund sentiment lately. Our calculations also showed that ARAV 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.

Michael Castor of Sio Capital

Michael Castor of Sio Capital

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out stocks recommended/scorned by legendary Bill Miller. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we’re going to take a look at the key hedge fund action surrounding Aravive, Inc. (NASDAQ:ARAV).

Hedge fund activity in Aravive, Inc. (NASDAQ:ARAV)

At Q1’s end, a total of 6 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -33% from the fourth quarter of 2019. On the other hand, there were a total of 0 hedge funds with a bullish position in ARAV a year ago. With hedgies’ positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were increasing their holdings meaningfully (or already accumulated large positions).

Is ARAV A Good Stock To Buy?

The largest stake in Aravive, Inc. (NASDAQ:ARAV) was held by Samsara BioCapital, which reported holding $3.3 million worth of stock at the end of September. It was followed by Renaissance Technologies with a $3.1 million position. Other investors bullish on the company included Baker Bros. Advisors, Two Sigma Advisors, and Sio Capital. In terms of the portfolio weights assigned to each position Samsara BioCapital allocated the biggest weight to Aravive, Inc. (NASDAQ:ARAV), around 1.91% of its 13F portfolio. Sio Capital is also relatively very bullish on the stock, dishing out 0.15 percent of its 13F equity portfolio to ARAV.

Judging by the fact that Aravive, Inc. (NASDAQ:ARAV) has witnessed a decline in interest from the aggregate hedge fund industry, we can see that there were a few funds that slashed their positions entirely in the first quarter. Intriguingly, Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors sold off the largest stake of all the hedgies followed by Insider Monkey, worth an estimated $0.8 million in stock, and Joseph Edelman’s Perceptive Advisors was right behind this move, as the fund said goodbye to about $0.5 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest was cut by 3 funds in the first quarter.

Let’s also examine hedge fund activity in other stocks similar to Aravive, Inc. (NASDAQ:ARAV). These stocks are A-Mark Precious Metals, Inc. (NASDAQ:AMRK), The Lovesac Company (NASDAQ:LOVE), Reading International, Inc. (NASDAQ:RDI), and Tailored Brands, Inc. (NYSE:TLRD). This group of stocks’ market values resemble ARAV’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
AMRK 4 1476 1
LOVE 7 6858 0
RDI 12 10016 1
TLRD 6 9030 -6
Average 7.25 6845 -1

View table here if you experience formatting issues.

As you can see these stocks had an average of 7.25 hedge funds with bullish positions and the average amount invested in these stocks was $7 million. That figure was $11 million in ARAV’s case. Reading International, Inc. (NASDAQ:RDI) is the most popular stock in this table. On the other hand A-Mark Precious Metals, Inc. (NASDAQ:AMRK) is the least popular one with only 4 bullish hedge fund positions. Aravive, Inc. (NASDAQ:ARAV) is not the least popular stock in this group but hedge fund interest is still below average. 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 13.9% in 2020 through June 10th and still beat the market by 14.2 percentage points. A small number of hedge funds were also right about betting on ARAV as the stock returned 126.2% during the second quarter and outperformed the market by an even larger margin.

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