Hedge Funds Are Selling Arcus Biosciences, Inc. (RCUS)

While the market driven by short-term sentiment influenced by the accommodative interest rate environment in the US, virus news and stimulus spending, many smart money investors are starting to get cautious towards the current bull run since March, 2020 and hedging or reducing many of their long positions. Some fund managers are betting on Dow hitting 40,000 to generate strong returns. However, as we know, big investors usually buy stocks with strong fundamentals that can deliver gains both in bull and bear markets, which is why we believe we can profit from imitating them. In this article, we are going to take a look at the smart money sentiment surrounding Arcus Biosciences, Inc. (NYSE:RCUS).

Is Arcus Biosciences, Inc. (NYSE:RCUS) a buy here? Prominent investors were cutting their exposure. The number of long hedge fund positions were cut by 1 in recent months. Arcus Biosciences, Inc. (NYSE:RCUS) was in 21 hedge funds’ portfolios at the end of September. The all time high for this statistic is 31. Our calculations also showed that RCUS isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. Keeping this in mind we’re going to take a look at the key hedge fund action surrounding Arcus Biosciences, Inc. (NYSE:RCUS).

Arthur B Cohen and Joseph Healey of Healthcor Management LP

Do Hedge Funds Think RCUS Is A Good Stock To Buy Now?

At third quarter’s end, a total of 21 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -5% from one quarter earlier. By comparison, 26 hedge funds held shares or bullish call options in RCUS a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in Arcus Biosciences, Inc. (NYSE:RCUS) was held by EcoR1 Capital, which reported holding $178.6 million worth of stock at the end of September. It was followed by Partner Fund Management with a $119.6 million position. Other investors bullish on the company included Biotechnology Value Fund / BVF Inc, Woodline Partners, and Octagon Capital Advisors. In terms of the portfolio weights assigned to each position Octagon Capital Advisors allocated the biggest weight to Arcus Biosciences, Inc. (NYSE:RCUS), around 8.33% of its 13F portfolio. Copernicus Capital Management is also relatively very bullish on the stock, earmarking 7.18 percent of its 13F equity portfolio to RCUS.

Since Arcus Biosciences, Inc. (NYSE:RCUS) has experienced a decline in interest from hedge fund managers, it’s safe to say that there lies a certain “tier” of money managers who sold off their entire stakes by the end of the third quarter. It’s worth mentioning that Renaissance Technologies said goodbye to the biggest investment of the 750 funds watched by Insider Monkey, totaling an estimated $7.6 million in call options. Efrem Kamen’s fund, Pura Vida Investments, also said goodbye to its call options, about $2.4 million worth. These transactions are interesting, as aggregate hedge fund interest dropped by 1 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 Arcus Biosciences, Inc. (NYSE:RCUS) but similarly valued. These stocks are Albany International Corp. (NYSE:AIN), VNET Group Inc (NASDAQ:VNET), Opko Health Inc. (NASDAQ:OPK), SkyWest, Inc. (NASDAQ:SKYW), Cassava Sciences, Inc. (NASDAQ:SAVA), Array Technologies, Inc. (NASDAQ:ARRY), and Magellan Health Inc (NASDAQ:MGLN). This group of stocks’ market caps resemble RCUS’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
AIN 17 38508 5
VNET 16 173326 -7
OPK 12 19201 -6
SKYW 14 36968 0
SAVA 10 34243 -3
ARRY 14 88667 -4
MGLN 23 620126 -3
Average 15.1 144434 -2.6

View table here if you experience formatting issues.

As you can see these stocks had an average of 15.1 hedge funds with bullish positions and the average amount invested in these stocks was $144 million. That figure was $574 million in RCUS’s case. Magellan Health Inc (NASDAQ:MGLN) is the most popular stock in this table. On the other hand Cassava Sciences, Inc. (NASDAQ:SAVA) is the least popular one with only 10 bullish hedge fund positions. Arcus Biosciences, Inc. (NYSE:RCUS) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for RCUS is 66.6. 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. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 29.6% in 2021 and still beat the market by 3.6 percentage points. Hedge funds were also right about betting on RCUS as the stock returned 16.1% since the end of Q3 (through 12/31) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

Follow Arcus Biosciences Inc.

Suggested Articles:

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