Hedge Funds Are Selling IVERIC bio, Inc. (ISEE)

In this article we are going to use hedge fund sentiment as a tool and determine whether IVERIC bio, Inc. (NASDAQ:ISEE) is a good investment right now. We like to analyze hedge fund sentiment before conducting days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy League graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments and it is a fact that hedge funds’ picks don’t beat the market 100% of the time, but their consensus picks have historically done very well and have outperformed the market after adjusting for risk.

Is IVERIC bio, Inc. (NASDAQ:ISEE) a bargain? The best stock pickers were turning less bullish. The number of bullish hedge fund positions were trimmed by 3 in recent months. IVERIC bio, Inc. (NASDAQ:ISEE) was in 26 hedge funds’ portfolios at the end of March. The all time high for this statistic is 38. Our calculations also showed that ISEE isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 115 percentage points since March 2017 (see the details here). That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

James Flynn Deerfield Management

James E. Flynn of Deerfield Management

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, economists warn of inflation flare up. So, we are checking out this backdoor gold play that has hit peak gains of 718% in a little over a year. We go through lists like the 10 best battery 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. 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 homepage. Now let’s go over the new hedge fund action surrounding IVERIC bio, Inc. (NASDAQ:ISEE).

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

At the end of March, a total of 26 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -10% from the previous quarter. On the other hand, there were a total of 23 hedge funds with a bullish position in ISEE 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, Avoro Capital Advisors (venBio Select Advisor) was the largest shareholder of IVERIC bio, Inc. (NASDAQ:ISEE), with a stake worth $44.8 million reported as of the end of March. Trailing Avoro Capital Advisors (venBio Select Advisor) was Vivo Capital, which amassed a stake valued at $36.9 million. Deerfield Management, Perceptive Advisors, and Soleus 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 Commodore Capital allocated the biggest weight to IVERIC bio, Inc. (NASDAQ:ISEE), around 4.21% of its 13F portfolio. Soleus Capital is also relatively very bullish on the stock, earmarking 3.76 percent of its 13F equity portfolio to ISEE.

Because IVERIC bio, Inc. (NASDAQ:ISEE) has faced a decline in interest from hedge fund managers, we can see that there were a few hedge funds who sold off their entire stakes in the first quarter. Interestingly, Mitchell Blutt’s Consonance Capital Management dropped the biggest investment of the 750 funds followed by Insider Monkey, comprising about $16.4 million in stock, and Christiana Goh Bardon’s Burrage Capital Management was right behind this move, as the fund dropped about $9.6 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest dropped by 3 funds in the first quarter.

Let’s now review hedge fund activity in other stocks similar to IVERIC bio, Inc. (NASDAQ:ISEE). We will take a look at Solaris Oilfield Infrastructure, Inc. (NYSE:SOI), Ares Commercial Real Estate Corp (NYSE:ACRE), AC Immune SA (NASDAQ:ACIU), Marine Products Corp. (NYSE:MPX), Daseke, Inc. (NASDAQ:DSKE), RAPT Therapeutics, Inc. (NASDAQ:RAPT), and Eagle Pharmaceuticals Inc (NASDAQ:EGRX). This group of stocks’ market valuations are closest to ISEE’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
SOI 10 43941 -2
ACRE 14 42046 6
ACIU 13 93167 2
MPX 5 13660 1
DSKE 13 55373 -1
RAPT 13 96426 0
EGRX 17 63989 -1
Average 12.1 58372 0.7

View table here if you experience formatting issues.

As you can see these stocks had an average of 12.1 hedge funds with bullish positions and the average amount invested in these stocks was $58 million. That figure was $287 million in ISEE’s case. Eagle Pharmaceuticals Inc (NASDAQ:EGRX) is the most popular stock in this table. On the other hand Marine Products Corp. (NYSE:MPX) is the least popular one with only 5 bullish hedge fund positions. Compared to these stocks IVERIC bio, Inc. (NASDAQ:ISEE) is more popular among hedge funds. Our overall hedge fund sentiment score for ISEE is 72.5. 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 returned 24% in 2021 through July 9th but still managed to beat the market by 6.7 percentage points. Hedge funds were also right about betting on ISEE as the stock returned 55.3% since the end of March (through 7/9) 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.