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Hedge Funds Have Never Been This Bullish On Arcus Biosciences, Inc. (RCUS)

We at Insider Monkey have gone over 821 13F filings that hedge funds and prominent investors are required to file by the SEC The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, near the height of the coronavirus market crash. In this article, we look at what those funds think of Arcus Biosciences, Inc. (NYSE:RCUS) based on that data.

Is Arcus Biosciences, Inc. (NYSE:RCUS) a bargain? Prominent investors are becoming hopeful. The number of long hedge fund bets went up by 8 recently. Our calculations also showed that RCUS isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks). RCUS was in 23 hedge funds’ portfolios at the end of March. There were 15 hedge funds in our database with RCUS holdings at the end of the previous quarter.

Video: Watch our video about the top 5 most popular hedge fund stocks.

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 58 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 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Lei Zhang Hillhouse Capital

Lei Zhang of Hillhouse Capital Management

We leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like these. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind we’re going to check out the key hedge fund action regarding Arcus Biosciences, Inc. (NYSE:RCUS).

How are hedge funds trading Arcus Biosciences, Inc. (NYSE:RCUS)?

Heading into the second quarter of 2020, a total of 23 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 53% from the previous quarter. By comparison, 8 hedge funds held shares or bullish call options in RCUS a year ago. With the smart money’s capital changing hands, there exists a select group of notable hedge fund managers who were increasing their holdings significantly (or already accumulated large positions).

Among these funds, Partner Fund Management held the most valuable stake in Arcus Biosciences, Inc. (NYSE:RCUS), which was worth $11.2 million at the end of the third quarter. On the second spot was Hillhouse Capital Management which amassed $10.6 million worth of shares. Millennium Management, EcoR1 Capital, and Renaissance Technologies 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 Partner Fund Management allocated the biggest weight to Arcus Biosciences, Inc. (NYSE:RCUS), around 0.92% of its 13F portfolio. Sectoral Asset Management is also relatively very bullish on the stock, dishing out 0.7 percent of its 13F equity portfolio to RCUS.

As one would reasonably expect, key hedge funds have jumped into Arcus Biosciences, Inc. (NYSE:RCUS) headfirst. Partner Fund Management, managed by Christopher James, created the most outsized position in Arcus Biosciences, Inc. (NYSE:RCUS). Partner Fund Management had $11.2 million invested in the company at the end of the quarter. Jerome Pfund and Michael Sjostrom’s Sectoral Asset Management also initiated a $3.6 million position during the quarter. The other funds with brand new RCUS positions are Dmitry Balyasny’s Balyasny Asset Management, Panayotis Takis Sparaggis’s Alkeon Capital Management, and Michael Rockefeller and KarláKroeker’s Woodline Partners.

Let’s now take a look at hedge fund activity in other stocks similar to Arcus Biosciences, Inc. (NYSE:RCUS). We will take a look at Washington Trust Bancorp, Inc. (NASDAQ:WASH), NextPoint Residential Trust Inc (NYSE:NXRT), ChipMOS TECHNOLOGIES INC. (NASDAQ:IMOS), and Opus Bank (NASDAQ:OPB). This group of stocks’ market valuations are similar to RCUS’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
WASH 7 21341 2
NXRT 11 79180 -5
IMOS 2 29197 -1
OPB 8 28016 -2
Average 7 39434 -1.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 7 hedge funds with bullish positions and the average amount invested in these stocks was $39 million. That figure was $52 million in RCUS’s case. NextPoint Residential Trust Inc (NYSE:NXRT) is the most popular stock in this table. On the other hand ChipMOS TECHNOLOGIES INC. (NASDAQ:IMOS) is the least popular one with only 2 bullish hedge fund positions. Compared to these stocks Arcus Biosciences, Inc. (NYSE:RCUS) is more popular among hedge funds. 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 returned 13.9% in 2020 through June 10th but still managed to beat the market by 14.2 percentage points. Hedge funds were also right about betting on RCUS as the stock returned 113.5% so far in Q2 (through June 10th) 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.