Is UroGen Pharma Ltd. (NASDAQ:URGN) a good place to invest some of your money right now? We can gain invaluable insight to help us answer that question by studying the investment trends of top investors, who employ world-class Ivy League graduates, who are given immense resources and industry contacts to put their financial expertise to work. The top picks of these firms have historically outperformed the market when we account for known risk factors, making them very valuable investment ideas.
UroGen Pharma Ltd. (NASDAQ:URGN) investors should pay attention to a decrease in support from the world’s most elite money managers in recent months. UroGen Pharma Ltd. (NASDAQ:URGN) was in 4 hedge funds’ portfolios at the end of September. The all time high for this statistics is 17. There were 5 hedge funds in our database with URGN holdings at the end of June. Our calculations also showed that URGN 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.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 66 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
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. With all of this in mind let’s view the recent hedge fund action regarding UroGen Pharma Ltd. (NASDAQ:URGN).
How have hedgies been trading UroGen Pharma Ltd. (NASDAQ:URGN)?
At third quarter’s end, a total of 4 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -20% from one quarter earlier. By comparison, 11 hedge funds held shares or bullish call options in URGN a year ago. With hedge funds’ capital changing hands, there exists a select group of key hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Leonard A. Potter’s Wildcat Capital Management has the number one position in UroGen Pharma Ltd. (NASDAQ:URGN), worth close to $24.2 million, comprising 7.7% of its total 13F portfolio. The second largest stake is held by Millennium Management, led by Israel Englander, holding a $1.7 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Some other peers that are bullish comprise Ken Griffin’s Citadel Investment Group, William Leland Edwards’s Palo Alto Investors and . In terms of the portfolio weights assigned to each position Wildcat Capital Management allocated the biggest weight to UroGen Pharma Ltd. (NASDAQ:URGN), around 7.72% of its 13F portfolio. Palo Alto Investors is also relatively very bullish on the stock, dishing out 0.03 percent of its 13F equity portfolio to URGN.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Algert Coldiron Investors. One hedge fund selling its entire position doesn’t always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don’t think this is the case in this case because none of the 750+ hedge funds tracked by Insider Monkey identified URGN as a viable investment and initiated a position in the stock.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as UroGen Pharma Ltd. (NASDAQ:URGN) but similarly valued. These stocks are Lands’ End, Inc. (NASDAQ:LE), Sabine Royalty Trust (NYSE:SBR), Lindblad Expeditions Holdings Inc (NASDAQ:LIND), IRSA Propiedades Comerciales S.A. (NASDAQ:IRCP), Viking Therapeutics, Inc. (NASDAQ:VKTX), Clarus Corporation (NASDAQ:CLAR), and Orchard Therapeutics plc (NASDAQ:ORTX). This group of stocks’ market values are closest to URGN’s market value.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
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As you can see these stocks had an average of 11.6 hedge funds with bullish positions and the average amount invested in these stocks was $48 million. That figure was $27 million in URGN’s case. Lindblad Expeditions Holdings Inc (NASDAQ:LIND) is the most popular stock in this table. On the other hand IRSA Propiedades Comerciales S.A. (NASDAQ:IRCP) is the least popular one with only 5 bullish hedge fund positions. Compared to these stocks UroGen Pharma Ltd. (NASDAQ:URGN) is even less popular than IRCP. Our overall hedge fund sentiment score for URGN is 11.1. 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 URGN. 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 30.7% in 2020 through November 27th but managed to beat the market again by 16.1 percentage points. Unfortunately URGN wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); URGN investors were disappointed as the stock returned 6.3% since the end of the third quarter (through 11/27) 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.
Disclosure: None. This article was originally published at Insider Monkey.