Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors’ consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of Aurinia Pharmaceuticals Inc (NASDAQ:AUPH).
Is Aurinia Pharmaceuticals Inc (NASDAQ:AUPH) an excellent investment right now? The best stock pickers are becoming hopeful. The number of long hedge fund bets increased by 7 recently. Our calculations also showed that AUPH 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). AUPH was in 28 hedge funds’ portfolios at the end of March. There were 21 hedge funds in our database with AUPH holdings at the end of the previous quarter.
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 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 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 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.
Noam Gottesman of GLG Partners
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out trades like this one as well as this tiny lithium play. 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. With all of this in mind we’re going to review the key hedge fund action regarding Aurinia Pharmaceuticals Inc (NASDAQ:AUPH).
What have hedge funds been doing with Aurinia Pharmaceuticals Inc (NASDAQ:AUPH)?
At Q1’s end, a total of 28 of the hedge funds tracked by Insider Monkey were long this stock, a change of 33% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards AUPH over the last 18 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Healthcor Management LP held the most valuable stake in Aurinia Pharmaceuticals Inc (NASDAQ:AUPH), which was worth $141.7 million at the end of the third quarter. On the second spot was Consonance Capital Management which amassed $100.3 million worth of shares. Point72 Asset Management, Avoro Capital Advisors (venBio Select Advisor), and Baker Bros. Advisors 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 Consonance Capital Management allocated the biggest weight to Aurinia Pharmaceuticals Inc (NASDAQ:AUPH), around 7.47% of its 13F portfolio. Healthcor Management LP is also relatively very bullish on the stock, dishing out 6.06 percent of its 13F equity portfolio to AUPH.
As one would reasonably expect, specific money managers have jumped into Aurinia Pharmaceuticals Inc (NASDAQ:AUPH) headfirst. Avoro Capital Advisors (venBio Select Advisor), managed by Behzad Aghazadeh, created the largest position in Aurinia Pharmaceuticals Inc (NASDAQ:AUPH). Avoro Capital Advisors (venBio Select Advisor) had $25 million invested in the company at the end of the quarter. Manfred Yu’s Acuta Capital Partners also made a $11.2 million investment in the stock during the quarter. The other funds with brand new AUPH positions are Phill Gross and Robert Atchinson’s Adage Capital Management, D. E. Shaw’s D E Shaw, and Noam Gottesman’s GLG Partners.
Let’s go over hedge fund activity in other stocks similar to Aurinia Pharmaceuticals Inc (NASDAQ:AUPH). We will take a look at Ambarella Inc (NASDAQ:AMBA), Sabre Corporation (NASDAQ:SABR), ABM Industries, Inc. (NYSE:ABM), and Columbia Financial, Inc. (NASDAQ:CLBK). All of these stocks’ market caps are closest to AUPH’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| AMBA | 21 | 161557 | -5 |
| SABR | 30 | 134131 | 6 |
| ABM | 18 | 46833 | 6 |
| CLBK | 10 | 41683 | -1 |
| Average | 19.75 | 96051 | 1.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 19.75 hedge funds with bullish positions and the average amount invested in these stocks was $96 million. That figure was $483 million in AUPH’s case. Sabre Corporation (NASDAQ:SABR) is the most popular stock in this table. On the other hand Columbia Financial, Inc. (NASDAQ:CLBK) is the least popular one with only 10 bullish hedge fund positions. Aurinia Pharmaceuticals Inc (NASDAQ:AUPH) is not the most popular stock in this group but hedge fund interest is still above average. 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 8.3% in 2020 through the end of May but beat the market by 13.2 percentage points. Unfortunately AUPH wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on AUPH were disappointed as the stock returned 9.4% during the same time period 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.
