Hedge Funds Have Never Been This Bullish On Arcturus Therapeutics Holdings Inc. (ARCT)

We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards Arcturus Therapeutics Holdings Inc. (NASDAQ:ARCT) and determine whether hedge funds skillfully traded this stock.

Arcturus Therapeutics Holdings Inc. (NASDAQ:ARCT) shareholders have witnessed an increase in enthusiasm from smart money lately. Arcturus Therapeutics Holdings Inc. (NASDAQ:ARCT) was in 21 hedge funds’ portfolios at the end of the second quarter of 2020. The all time high for this statistics is 11. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that ARCT isn’t among the 30 most popular stocks among hedge funds (click for Q2 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.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 56 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 34% through August 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Nathan Fischel DAFNA Capital

Nathan Fischel of DAFNA Capital 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 precious metals prices. So, we are checking out this junior gold mining stock. We are also checking out this lithium company which could benefit from the electric car adoption. 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 to get excerpts of these letters in your inbox. Now let’s view the key hedge fund action regarding Arcturus Therapeutics Holdings Inc. (NASDAQ:ARCT).

What does smart money think about Arcturus Therapeutics Holdings Inc. (NASDAQ:ARCT)?

At Q2’s end, a total of 21 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 91% from the previous quarter. By comparison, 5 hedge funds held shares or bullish call options in ARCT a year ago. With the smart money’s sentiment swirling, there exists a select group of notable hedge fund managers who were increasing their holdings significantly (or already accumulated large positions).

The largest stake in Arcturus Therapeutics Holdings Inc. (NASDAQ:ARCT) was held by Cormorant Asset Management, which reported holding $37.4 million worth of stock at the end of September. It was followed by Citadel Investment Group with a $32.6 million position. Other investors bullish on the company included OrbiMed Advisors, Point72 Asset Management, and DAFNA Capital Management. In terms of the portfolio weights assigned to each position DAFNA Capital Management allocated the biggest weight to Arcturus Therapeutics Holdings Inc. (NASDAQ:ARCT), around 2.01% of its 13F portfolio. Cormorant Asset Management is also relatively very bullish on the stock, designating 1.43 percent of its 13F equity portfolio to ARCT.

Consequently, some big names were leading the bulls’ herd. OrbiMed Advisors, managed by Samuel Isaly, created the most valuable position in Arcturus Therapeutics Holdings Inc. (NASDAQ:ARCT). OrbiMed Advisors had $11.2 million invested in the company at the end of the quarter. Steve Cohen’s Point72 Asset Management also initiated a $10.4 million position during the quarter. The other funds with new positions in the stock are Michael Rockefeller and KarláKroeker’s Woodline Partners, Phill Gross and Robert Atchinson’s Adage Capital Management, and Arthur B Cohen and Joseph Healey’s Healthcor Management LP.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Arcturus Therapeutics Holdings Inc. (NASDAQ:ARCT) but similarly valued. We will take a look at Lantheus Holdings Inc (NASDAQ:LNTH), ePlus Inc. (NASDAQ:PLUS), e.l.f. Beauty, Inc. (NYSE:ELF), Phathom Pharmaceuticals, Inc. (NASDAQ:PHAT), Provident Financial Services, Inc. (NYSE:PFS), AudioCodes Ltd. (NASDAQ:AUDC), and Grupo Simec S.A.B. de C.V. (NYSE:SIM). All of these stocks’ market caps match ARCT’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
LNTH 20 141235 0
PLUS 16 43799 3
ELF 22 236778 2
PHAT 5 341507 -1
PFS 10 29459 -2
AUDC 12 38007 2
SIM 1 1571 0
Average 12.3 118908 0.6

View table here if you experience formatting issues.

As you can see these stocks had an average of 12.3 hedge funds with bullish positions and the average amount invested in these stocks was $119 million. That figure was $134 million in ARCT’s case. e.l.f. Beauty, Inc. (NYSE:ELF) is the most popular stock in this table. On the other hand Grupo Simec S.A.B. de C.V. (NYSE:SIM) is the least popular one with only 1 bullish hedge fund positions. Arcturus Therapeutics Holdings Inc. (NASDAQ:ARCT) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for ARCT is 87.6. 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. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. 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 24.8% in 2020 through the end of September and beat the market by 19.3 percentage points. Unfortunately ARCT wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on ARCT were disappointed as the stock returned -8.2% in Q3 and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.

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