Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that’s why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to smartest analysts and expensive data/information sources that individual investors can’t match. So should one consider investing in Aerpio Pharmaceuticals, Inc. (NASDAQ:ARPO)? The smart money sentiment can provide an answer to this question.
Is Aerpio Pharmaceuticals (ARPO) a good stock to buy now? ARPO has seen an increase in activity from the world’s largest hedge funds recently. Aerpio Pharmaceuticals, Inc. (NASDAQ:ARPO) was in 8 hedge funds’ portfolios at the end of September. The all time high for this statistics is 5. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that ARPO 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.
To the average investor there are dozens of signals stock traders use to size up their holdings. A couple of the less utilized signals are hedge fund and insider trading moves. We have shown that, historically, those who follow the best picks of the top hedge fund managers can trounce the broader indices by a healthy margin (see the details here).
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 15 best blue chip stocks 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. With all of this in mind we’re going to take a glance at the key hedge fund action surrounding Aerpio Pharmaceuticals, Inc. (NASDAQ:ARPO).
What does smart money think about Aerpio Pharmaceuticals, Inc. (NASDAQ:ARPO)?
At the end of the third quarter, a total of 8 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 300% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in ARPO over the last 21 quarters. With hedgies’ capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).
The largest stake in Aerpio Pharmaceuticals, Inc. (NASDAQ:ARPO) was held by OrbiMed Advisors, which reported holding $7.8 million worth of stock at the end of September. It was followed by Ikarian Capital with a $5.9 million position. Other investors bullish on the company included Citadel Investment Group, Renaissance Technologies, and Parkman Healthcare Partners. In terms of the portfolio weights assigned to each position Ikarian Capital allocated the biggest weight to Aerpio Pharmaceuticals, Inc. (NASDAQ:ARPO), around 0.43% of its 13F portfolio. Parkman Healthcare Partners is also relatively very bullish on the stock, earmarking 0.12 percent of its 13F equity portfolio to ARPO.
Now, some big names were leading the bulls’ herd. Ikarian Capital, managed by Neil Shahrestani, established the most outsized position in Aerpio Pharmaceuticals, Inc. (NASDAQ:ARPO). Ikarian Capital had $5.9 million invested in the company at the end of the quarter. Ken Griffin’s Citadel Investment Group also made a $3.1 million investment in the stock during the quarter. The following funds were also among the new ARPO investors: Greg Martinez’s Parkman Healthcare Partners, John Overdeck and David Siegel’s Two Sigma Advisors, and Israel Englander’s Millennium Management.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Aerpio Pharmaceuticals, Inc. (NASDAQ:ARPO) but similarly valued. These stocks are Marathon Patent Group, Inc. (NASDAQ:MARA), Curis, Inc. (NASDAQ:CRIS), Kingstone Companies Inc (NASDAQ:KINS), LightPath Technologies, Inc. (NASDAQ:LPTH), Riverview Financial Corporation (NASDAQ:RIVE), Golden Minerals Co (NYSE:AUMN), and Qumu Corp (NASDAQ:QUMU). This group of stocks’ market values are closest to ARPO’s market value.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 4.3 hedge funds with bullish positions and the average amount invested in these stocks was $6 million. That figure was $20 million in ARPO’s case. Curis, Inc. (NASDAQ:CRIS) is the most popular stock in this table. On the other hand Golden Minerals Co (NYSE:AUMN) is the least popular one with only 1 bullish hedge fund positions. Aerpio Pharmaceuticals, Inc. (NASDAQ:ARPO) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for ARPO is 78.9. 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. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 31.6% in 2020 through December 2nd and still beat the market by 16 percentage points. Hedge funds were also right about betting on ARPO as the stock returned 15.3% since the end of Q3 (through 12/2) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.