Hedge Funds Are Dumping Evelo Biosciences, Inc. (EVLO)

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 third 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 5 years and analyze what the smart money thinks of Evelo Biosciences, Inc. (NASDAQ:EVLO) based on that data.

Evelo Biosciences, Inc. (NASDAQ:EVLO) investors should be aware of a decrease in enthusiasm from smart money lately. Evelo Biosciences, Inc. (NASDAQ:EVLO) was in 3 hedge funds’ portfolios at the end of September. The all time high for this statistics is 6. There were 6 hedge funds in our database with EVLO holdings at the end of June. Our calculations also showed that EVLO isn’t among the 30 most popular stocks among hedge funds (click for Q3 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.

According to most traders, hedge funds are assumed to be worthless, old investment vehicles of the past. While there are more than 8000 funds with their doors open today, Our researchers look at the top tier of this club, around 850 funds. Most estimates calculate that this group of people direct bulk of the hedge fund industry’s total capital, and by keeping track of their matchless picks, Insider Monkey has identified a number of investment strategies that have historically outperformed the broader indices. Insider Monkey’s flagship short hedge fund strategy outstripped the S&P 500 short ETFs by around 20 percentage points annually since its inception in March 2017. Our portfolio of short stocks lost 13% since February 2017 (through November 17th) even though the market was up 65% during the same period. We just shared a list of 6 short targets in our latest quarterly update .


Israel Englander of Millennium Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 10 most profitable companies in the world 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. You can subscribe to our free daily newsletter on our website. Keeping this in mind let’s review the fresh hedge fund action surrounding Evelo Biosciences, Inc. (NASDAQ:EVLO).

What does smart money think about Evelo Biosciences, Inc. (NASDAQ:EVLO)?

At Q3’s end, a total of 3 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -50% from one quarter earlier. On the other hand, there were a total of 5 hedge funds with a bullish position in EVLO 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.

More specifically, Biotechnology Value Fund / BVF Inc was the largest shareholder of Evelo Biosciences, Inc. (NASDAQ:EVLO), with a stake worth $6.9 million reported as of the end of September. Trailing Biotechnology Value Fund / BVF Inc was Millennium Management, which amassed a stake valued at $0.8 million. Renaissance Technologies was 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 Biotechnology Value Fund / BVF Inc allocated the biggest weight to Evelo Biosciences, Inc. (NASDAQ:EVLO), around 0.37% of its 13F portfolio. Millennium Management is also relatively very bullish on the stock, earmarking 0.001 percent of its 13F equity portfolio to EVLO.

Since Evelo Biosciences, Inc. (NASDAQ:EVLO) has experienced falling interest from the aggregate hedge fund industry, it’s easy to see that there is a sect of money managers who sold off their entire stakes by the end of the third quarter. Interestingly, Oleg Nodelman’s EcoR1 Capital dropped the largest position of the “upper crust” of funds followed by Insider Monkey, totaling close to $6.1 million in stock, and Benjamin A. Smith’s Laurion Capital Management was right behind this move, as the fund sold off about $0.1 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest dropped by 3 funds by the end of the third quarter.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Evelo Biosciences, Inc. (NASDAQ:EVLO) but similarly valued. We will take a look at HOOKIPA Pharma Inc. (NASDAQ:HOOK), Rimini Street, Inc. (NASDAQ:RMNI), NextCure, Inc. (NASDAQ:NXTC), Fidus Investment Corp (NASDAQ:FDUS), ProQR Therapeutics NV (NASDAQ:PRQR), The Marcus Corporation (NYSE:MCS), and Greenlight Capital Re, Ltd. (NASDAQ:GLRE). All of these stocks’ market caps resemble EVLO’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
HOOK 7 34432 -2
RMNI 9 99016 1
NXTC 13 54862 -3
FDUS 5 6368 1
PRQR 5 39417 -2
MCS 13 14607 0
GLRE 4 1004 -2
Average 8 35672 -1

View table here if you experience formatting issues.

As you can see these stocks had an average of 8 hedge funds with bullish positions and the average amount invested in these stocks was $36 million. That figure was $8 million in EVLO’s case. NextCure, Inc. (NASDAQ:NXTC) is the most popular stock in this table. On the other hand Greenlight Capital Re, Ltd. (NASDAQ:GLRE) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks Evelo Biosciences, Inc. (NASDAQ:EVLO) is even less popular than GLRE. Our overall hedge fund sentiment score for EVLO is 17. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Hedge funds dodged a bullet by taking a bearish stance towards EVLO. Our calculations showed that the top 20 most popular hedge fund stocks returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 28.1% in 2020 through November 23rd but managed to beat the market again by 15.4 percentage points. Unfortunately EVLO wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); EVLO investors were disappointed as the stock returned -11% since the end of the third quarter (through 11/23) 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 most of these stocks already outperformed the market so far in 2020.

Follow Evelo Biosciences Inc. (NASDAQ:EVLO)

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