Hedge Funds Watching Avita Medical Limited (RCEL) From Afar

In this article you are going to find out whether hedge funds think Avita Medical Limited (NASDAQ:RCEL) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It’s not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.

Avita Medical Limited (NASDAQ:RCEL) shares haven’t seen a lot of action during the first quarter. Overall, hedge fund sentiment was unchanged. The stock was in 3 hedge funds’ portfolios at the end of the first quarter of 2020. At the end of this article we will also compare RCEL to other stocks including Codexis, Inc. (NASDAQ:CDXS), Amerant Bancorp Inc. (NASDAQ:AMTB), and Altisource Residential Corporation (NYSE:RESI) to get a better sense of its popularity.

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

According to most investors, hedge funds are seen as worthless, outdated financial tools of years past. While there are greater than 8000 funds in operation at the moment, Our experts choose to focus on the crème de la crème of this group, around 850 funds. These money managers shepherd most of the smart money’s total capital, and by paying attention to their inimitable stock picks, Insider Monkey has figured out a number of investment strategies that have historically outperformed the broader indices. Insider Monkey’s flagship short hedge fund strategy outpaced the S&P 500 short ETFs by around 20 percentage points per annum since its inception in March 2017. Our portfolio of short stocks lost 36% since February 2017 (through May 18th) even though the market was up 30% during the same period. We just shared a list of 8 short targets in our latest quarterly update .

John Overdeck of Two Sigma

John Overdeck of Two Sigma Advisors

At Insider Monkey we leave no stone unturned when looking for the next great investment idea.  For example, we are still not out of the woods in terms of the coronavirus pandemic. So, we checked out this analyst’s “corona catalyst plays“. We interview hedge fund managers and ask them about their best ideas. You can watch our latest hedge fund manager interview here and find out the name of the large-cap healthcare stock that Sio Capital’s Michael Castor expects to double. 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 S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind let’s take a look at the latest hedge fund action regarding Avita Medical Limited (NASDAQ:RCEL).

What does smart money think about Avita Medical Limited (NASDAQ:RCEL)?

At the end of the first quarter, a total of 3 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the fourth quarter of 2019. Below, you can check out the change in hedge fund sentiment towards RCEL over the last 18 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were adding to their holdings significantly (or already accumulated large positions).

Of the funds tracked by Insider Monkey, Blackcrane Capital, managed by Daniel Kim, holds the largest position in Avita Medical Limited (NASDAQ:RCEL). Blackcrane Capital has a $32 million position in the stock, comprising 29.3% of its 13F portfolio. The second largest stake is held by Renaissance Technologies, founded by Jim Simons, holding a $0.7 million position; less than 0.1%% of its 13F portfolio is allocated to the company. In terms of the portfolio weights assigned to each position Blackcrane Capital allocated the biggest weight to Avita Medical Limited (NASDAQ:RCEL), around 29.28% of its 13F portfolio. Renaissance Technologies is also relatively very bullish on the stock, dishing out 0.0007 percent of its 13F equity portfolio to RCEL.

Since Avita Medical Limited (NASDAQ:RCEL) has experienced bearish sentiment from the aggregate hedge fund industry, logic holds that there were a few hedgies that slashed their positions entirely last quarter. It’s worth mentioning that Ken Griffin’s Citadel Investment Group sold off the largest stake of the 750 funds monitored by Insider Monkey, worth about $0.4 million in stock. Charles Frumberg’s fund, Emancipation Capital, also sold off its stock, about $0.1 million worth. These bearish behaviors are interesting, as total hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s go over hedge fund activity in other stocks similar to Avita Medical Limited (NASDAQ:RCEL). These stocks are Codexis, Inc. (NASDAQ:CDXS), Amerant Bancorp Inc. (NASDAQ:AMTB), Front Yard Residential Corporation (NYSE:RESI), and Carolina Financial Corporation (NASDAQ:CARO). This group of stocks’ market values are similar to RCEL’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CDXS 8 151091 -2
AMTB 2 5943 0
RESI 13 49548 -1
CARO 10 25235 1
Average 8.25 57954 -0.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 8.25 hedge funds with bullish positions and the average amount invested in these stocks was $58 million. That figure was $33 million in RCEL’s case. Front Yard Residential Corporation (NYSE:RESI) is the most popular stock in this table. On the other hand Amerant Bancorp Inc. (NASDAQ:AMTB) is the least popular one with only 2 bullish hedge fund positions. Avita Medical Limited (NASDAQ:RCEL) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and 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 7.9% in 2020 through May 22nd and surpassed the market by 15.6 percentage points. Unfortunately RCEL wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); RCEL investors were disappointed as the stock returned -3.9% during the second quarter 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 most of these stocks already outperformed the market in 2020.

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