Is Innoviva, Inc. (INVA) Going To Burn These Hedge Funds ?

While the market driven by short-term sentiment influenced by the accomodative interest rate environment in the US, increasing oil prices and deteriorating expectations towards the resolution of the trade war with China, many smart money investors kept their cautious approach regarding the current bull run in the second quarter and hedging or reducing many of their long positions. Some fund managers like this one are betting on Dow hitting 40,000 to generate strong returns. However, as we know, big investors usually buy stocks with strong fundamentals that can deliver gains both in bull and bear markets, which is why we believe we can profit from imitating them. In this article, we are going to take a look at the smart money sentiment surrounding Innoviva, Inc. (NASDAQ:INVA).

Innoviva, Inc. (NASDAQ:INVA) investors should pay attention to an increase in support from the world’s most elite money managers of late. INVA was in 23 hedge funds’ portfolios at the end of June. There were 21 hedge funds in our database with INVA holdings at the end of the previous quarter. Our calculations also showed that INVA isn’t among the 30 most popular stocks among hedge funds (see the video below).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to 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 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 market by 40 percentage points since May 2014 through May 30, 2019 (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.

Alex Denner Sarissa Capital

Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We’re going to take a gander at the fresh hedge fund action encompassing Innoviva, Inc. (NASDAQ:INVA).

How have hedgies been trading Innoviva, Inc. (NASDAQ:INVA)?

At Q2’s end, a total of 23 of the hedge funds tracked by Insider Monkey were long this stock, a change of 10% from the first quarter of 2019. The graph below displays the number of hedge funds with bullish position in INVA over the last 16 quarters. With hedgies’ positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were increasing their holdings meaningfully (or already accumulated large positions).

No of Hedge Funds with INVA Positions

Of the funds tracked by Insider Monkey, Renaissance Technologies holds the biggest position in Innoviva, Inc. (NASDAQ:INVA). Renaissance Technologies has a $102.6 million position in the stock, comprising 0.1% of its 13F portfolio. The second largest stake is held by Sarissa Capital Management, led by Alex Denner, holding a $90.9 million position; 11.3% of its 13F portfolio is allocated to the company. Remaining peers that are bullish consist of Noam Gottesman’s GLG Partners, D. E. Shaw’s D E Shaw and Himanshu Gulati’s Antara Capital.

As one would reasonably expect, key money managers were leading the bulls’ herd. HighVista Strategies, managed by Andre F. Perold, created the biggest position in Innoviva, Inc. (NASDAQ:INVA). HighVista Strategies had $2.8 million invested in the company at the end of the quarter. Dmitry Balyasny’s Balyasny Asset Management also made a $1.6 million investment in the stock during the quarter. The following funds were also among the new INVA investors: David Cohen and Harold Levy’s Iridian Asset Management, Israel Englander’s Millennium Management, and Matthew Tewksbury’s Stevens Capital Management.

Let’s also examine hedge fund activity in other stocks similar to Innoviva, Inc. (NASDAQ:INVA). These stocks are Plantronics, Inc. (NYSE:PLT), ICF International Inc (NASDAQ:ICFI), trivago N.V. (NASDAQ:TRVG), and Crocs, Inc. (NASDAQ:CROX). This group of stocks’ market valuations are closest to INVA’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
PLT 18 90298 -1
ICFI 15 50787 -2
TRVG 9 148988 -2
CROX 21 345004 -4
Average 15.75 158769 -2.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 15.75 hedge funds with bullish positions and the average amount invested in these stocks was $159 million. That figure was $321 million in INVA’s case. Crocs, Inc. (NASDAQ:CROX) is the most popular stock in this table. On the other hand trivago N.V. (NASDAQ:TRVG) is the least popular one with only 9 bullish hedge fund positions. Compared to these stocks Innoviva, Inc. (NASDAQ:INVA) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately INVA wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on INVA were disappointed as the stock returned -27.6% during the third 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 20 most popular stocks among hedge funds as many of these stocks already outperformed the market in Q3.

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