Is AUPH A Good Stock To Buy According To Hedge Funds?

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 AUPH a good stock to buy? Investors who are in the know were in a bullish mood. The number of bullish hedge fund positions moved up by 3 recently. Aurinia Pharmaceuticals Inc (NASDAQ:AUPH) was in 32 hedge funds’ portfolios at the end of September. The all time high for this statistic is 29. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that AUPH 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). There were 29 hedge funds in our database with AUPH holdings at the end of June.

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 was 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Samuel Isaly - Orbimed Advisors

Samuel Isaly, Founder of Orbimed Advisors

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this under the radar cannabis stock right now. We go through lists like the 15 best blue chip stocks to buy 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. Keeping this in mind let’s review the fresh hedge fund action surrounding Aurinia Pharmaceuticals Inc (NASDAQ:AUPH).

Do Hedge Funds Think AUPH Is A Good Stock To Buy Now?

At the end of September, a total of 32 of the hedge funds tracked by Insider Monkey were long this stock, a change of 10% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in AUPH over the last 21 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is AUPH A Good Stock To Buy?

Among these funds, Healthcor Management LP held the most valuable stake in Aurinia Pharmaceuticals Inc (NASDAQ:AUPH), which was worth $130.7 million at the end of the third quarter. On the second spot was OrbiMed Advisors which amassed $70 million worth of shares. Citadel Investment Group, Great Point Partners, and Point72 Asset Management 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 Healthcor Management LP allocated the biggest weight to Aurinia Pharmaceuticals Inc (NASDAQ:AUPH), around 5.23% of its 13F portfolio. Burrage Capital Management is also relatively very bullish on the stock, designating 4.21 percent of its 13F equity portfolio to AUPH.

As one would reasonably expect, specific money managers have been driving this bullishness. Great Point Partners, managed by Jeffrey Jay and David Kroin, created the most outsized position in Aurinia Pharmaceuticals Inc (NASDAQ:AUPH). Great Point Partners had $36.6 million invested in the company at the end of the quarter. Farallon Capital also initiated a $14.7 million position during the quarter. The following funds were also among the new AUPH investors: Kris Jenner, Gordon Bussard, Graham McPhail’s Rock Springs Capital Management, Steven Boyd’s Armistice Capital, and Philip Hempleman’s Ardsley Partners.

Let’s also examine hedge fund activity in other stocks similar to Aurinia Pharmaceuticals Inc (NASDAQ:AUPH). We will take a look at Methanex Corporation (NASDAQ:MEOH), CareDx, Inc. (NASDAQ:CDNA), Hilltop Holdings Inc. (NYSE:HTH), Cantel Medical Corp. (NYSE:CMD), Corsair Gaming, Inc. (NASDAQ:CRSR), Akcea Therapeutics, Inc. (NASDAQ:AKCA), and Rush Enterprises, Inc. (NASDAQ:RUSHA). All of these stocks’ market caps resemble AUPH’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
MEOH 16 89966 -1
CDNA 25 228629 2
HTH 25 120224 2
CMD 21 205405 2
CRSR 13 67972 13
AKCA 13 21755 2
RUSHA 17 71980 -1
Average 18.6 115133 2.7

View table here if you experience formatting issues.

As you can see these stocks had an average of 18.6 hedge funds with bullish positions and the average amount invested in these stocks was $115 million. That figure was $507 million in AUPH’s case. CareDx, Inc. (NASDAQ:CDNA) is the most popular stock in this table. On the other hand Corsair Gaming, Inc. (NASDAQ:CRSR) is the least popular one with only 13 bullish hedge fund positions. Compared to these stocks Aurinia Pharmaceuticals Inc (NASDAQ:AUPH) is more popular among hedge funds. Our overall hedge fund sentiment score for AUPH is 88. 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 33.3% in 2020 through December 18th and still beat the market by 16.4 percentage points. Unfortunately AUPH wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on AUPH were disappointed as the stock returned -11.5% since the end of the third quarter (through 12/18) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.

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