The 800+ hedge funds and famous money managers tracked by Insider Monkey have already compiled and submitted their 13F filings for the third quarter, which unveil their equity positions as of September 30. We went through these filings, fixed typos and other more significant errors and identified the changes in hedge fund portfolios. Our extensive review of these public filings is finally over, so this article is set to reveal the smart money sentiment towards Arrowhead Pharmaceuticals Inc. (NASDAQ:ARWR).
Is ARWR a good stock to buy now? Arrowhead Pharmaceuticals Inc. (NASDAQ:ARWR) shareholders have witnessed an increase in hedge fund sentiment in recent months. Arrowhead Pharmaceuticals Inc. (NASDAQ:ARWR) was in 22 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistic is 26. There were 21 hedge funds in our database with ARWR holdings at the end of June. Our calculations also showed that ARWR 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.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 more than 66 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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
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. Now let’s view the new hedge fund action encompassing Arrowhead Pharmaceuticals Inc. (NASDAQ:ARWR).
Do Hedge Funds Think ARWR Is A Good Stock To Buy Now?
At the end of September, a total of 22 of the hedge funds tracked by Insider Monkey were long this stock, a change of 5% from the second quarter of 2020. Below, you can check out the change in hedge fund sentiment towards ARWR over the last 21 quarters. With hedgies’ capital changing hands, there exists a few key hedge fund managers who were adding to their stakes considerably (or already accumulated large positions).
The largest stake in Arrowhead Pharmaceuticals Inc. (NASDAQ:ARWR) was held by Point72 Asset Management, which reported holding $57.4 million worth of stock at the end of September. It was followed by Vivo Capital with a $24.8 million position. Other investors bullish on the company included Aquilo Capital Management, Farallon Capital, and Citadel Investment Group. In terms of the portfolio weights assigned to each position Aquilo Capital Management allocated the biggest weight to Arrowhead Pharmaceuticals Inc. (NASDAQ:ARWR), around 2.39% of its 13F portfolio. Vivo Capital is also relatively very bullish on the stock, setting aside 1.43 percent of its 13F equity portfolio to ARWR.
As one would reasonably expect, specific money managers have been driving this bullishness. Millennium Management, managed by Israel Englander, assembled the biggest position in Arrowhead Pharmaceuticals Inc. (NASDAQ:ARWR). Millennium Management had $8.1 million invested in the company at the end of the quarter. Michael Rockefeller and KarláKroeker’s Woodline Partners also initiated a $3.8 million position during the quarter. The other funds with brand new ARWR positions are Greg Martinez’s Parkman Healthcare Partners, Peter Muller’s PDT Partners, and Renee Yao’s Neo Ivy Capital.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Arrowhead Pharmaceuticals Inc. (NASDAQ:ARWR) but similarly valued. These stocks are Douglas Emmett, Inc. (NYSE:DEI), Schneider National, Inc. (NYSE:SNDR), Jamf Holding Corp. (NASDAQ:JAMF), People’s United Financial, Inc. (NASDAQ:PBCT), Eaton Vance Corp (NYSE:EV), Kemper Corporation (NYSE:KMPR), and Vir Biotechnology, Inc. (NASDAQ:VIR). This group of stocks’ market valuations are similar to ARWR’s market valuation.
|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 17.6 hedge funds with bullish positions and the average amount invested in these stocks was $183 million. That figure was $189 million in ARWR’s case. Douglas Emmett, Inc. (NYSE:DEI) is the most popular stock in this table. On the other hand Vir Biotechnology, Inc. (NASDAQ:VIR) is the least popular one with only 6 bullish hedge fund positions. Arrowhead Pharmaceuticals Inc. (NASDAQ:ARWR) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for ARWR is 75.8. 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 30.7% in 2020 through December 14th and still beat the market by 15.8 percentage points. Hedge funds were also right about betting on ARWR as the stock returned 74% since the end of Q3 (through 12/14) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.