At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Clovis Oncology Inc (NASDAQ:CLVS).
Is CLVS a good stock to buy now? Clovis Oncology Inc (NASDAQ:CLVS) has experienced a decrease in activity from the world’s largest hedge funds recently. Clovis Oncology Inc (NASDAQ:CLVS) was in 15 hedge funds’ portfolios at the end of September. The all time high for this statistic is 57. There were 18 hedge funds in our database with CLVS holdings at the end of June. Our calculations also showed that CLVS 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.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 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.
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 we’re going to take a look at the key hedge fund action surrounding Clovis Oncology Inc (NASDAQ:CLVS).
Do Hedge Funds Think CLVS Is A Good Stock To Buy Now?
At the end of September, a total of 15 of the hedge funds tracked by Insider Monkey were long this stock, a change of -17% from the previous quarter. On the other hand, there were a total of 21 hedge funds with a bullish position in CLVS a year ago. With hedge funds’ sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were boosting their stakes meaningfully (or already accumulated large positions).
Among these funds, Palo Alto Investors held the most valuable stake in Clovis Oncology Inc (NASDAQ:CLVS), which was worth $26.1 million at the end of the third quarter. On the second spot was LMR Partners which amassed $12.8 million worth of shares. Armistice Capital, Citadel Investment Group, and Antara Capital 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 Healthcare Value Capital allocated the biggest weight to Clovis Oncology Inc (NASDAQ:CLVS), around 4.8% of its 13F portfolio. Palo Alto Investors is also relatively very bullish on the stock, earmarking 1.43 percent of its 13F equity portfolio to CLVS.
Since Clovis Oncology Inc (NASDAQ:CLVS) has experienced falling interest from the smart money, it’s safe to say that there is a sect of funds that elected to cut their positions entirely last quarter. It’s worth mentioning that Ken Griffin’s Citadel Investment Group sold off the largest stake of the “upper crust” of funds tracked by Insider Monkey, comprising close to $3.2 million in stock, and Chen Tianqiao’s Shanda Asset Management was right behind this move, as the fund dropped about $0.5 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest fell by 3 funds last quarter.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Clovis Oncology Inc (NASDAQ:CLVS) but similarly valued. These stocks are Nautilus, Inc. (NYSE:NLS), Loma Negra Compania Industrial Argentina Sociedad Anonima (NYSE:LOMA), Front Yard Residential Corporation (NYSE:RESI), Flexion Therapeutics Inc (NASDAQ:FLXN), Globalstar, Inc. (NYSE:GSAT), FuelCell Energy, Inc. (NASDAQ:FCEL), and Maxeon Solar Technologies, Ltd. (NASDAQ:MAXN). This group of stocks’ market valuations are similar to CLVS’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 13.7 hedge funds with bullish positions and the average amount invested in these stocks was $58 million. That figure was $70 million in CLVS’s case. Front Yard Residential Corporation (NYSE:RESI) is the most popular stock in this table. On the other hand Maxeon Solar Technologies, Ltd. (NASDAQ:MAXN) is the least popular one with only 5 bullish hedge fund positions. Clovis Oncology Inc (NASDAQ:CLVS) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for CLVS is 43.2. 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. 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 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 beat the market again by 15.8 percentage points. Unfortunately CLVS wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on CLVS were disappointed as the stock returned -8.6% since the end of September (through 12/14) 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 many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.