Concerns over rising interest rates and expected further rate increases have hit several stocks hard during the fourth quarter. NASDAQ and Russell 2000 indices were already in correction territory. More importantly, Russell 2000 ETF (IWM) underperformed the larger S&P 500 ETF (SPY) by nearly 7 percentage points in the fourth quarter. Hedge funds and institutional investors tracked by Insider Monkey usually invest a disproportionate amount of their portfolios in smaller cap stocks. We have been receiving indications that hedge funds were paring back their overall exposure and this is one of the factors behind the recent movements in major indices. In this article, we will take a closer look at hedge fund sentiment towards UroGen Pharma Ltd. (NASDAQ:URGN).
Is UroGen Pharma Ltd. (NASDAQ:URGN) a sound stock to buy now? The smart money is taking a pessimistic view. The number of long hedge fund bets fell by 1 recently. Our calculations also showed that URGN isn’t among the 30 most popular stocks among hedge funds.
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 32 percentage points since May 2014 through March 12, 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.
Let’s go over the new hedge fund action encompassing UroGen Pharma Ltd. (NASDAQ:URGN).
Hedge fund activity in UroGen Pharma Ltd. (NASDAQ:URGN)
Heading into the first quarter of 2019, a total of 12 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -8% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in URGN over the last 14 quarters. With hedge funds’ sentiment swirling, there exists a select group of notable hedge fund managers who were upping their holdings meaningfully (or already accumulated large positions).
The largest stake in UroGen Pharma Ltd. (NASDAQ:URGN) was held by Consonance Capital Management, which reported holding $65.3 million worth of stock at the end of December. It was followed by Wildcat Capital Management with a $26.4 million position. Other investors bullish on the company included Highline Capital Management, Citadel Investment Group, and GLG Partners.
Due to the fact that UroGen Pharma Ltd. (NASDAQ:URGN) has witnessed bearish sentiment from the entirety of the hedge funds we track, it’s easy to see that there was a specific group of funds that slashed their full holdings last quarter. It’s worth mentioning that Jim Simons’s Renaissance Technologies dropped the largest investment of the 700 funds monitored by Insider Monkey, valued at an estimated $0.8 million in stock, and David Harding’s Winton Capital Management was right behind this move, as the fund said goodbye to about $0.2 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest dropped by 1 funds last quarter.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as UroGen Pharma Ltd. (NASDAQ:URGN) but similarly valued. We will take a look at German American Bancorp., Inc. (NASDAQ:GABC), INTL Fcstone Inc (NASDAQ:INTL), Victory Capital Holdings, Inc. (NASDAQ:VCTR), and Hersha Hospitality Trust (NYSE:HT). All of these stocks’ market caps are similar to URGN’s market cap.
|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 10 hedge funds with bullish positions and the average amount invested in these stocks was $40 million. That figure was $143 million in URGN’s case. INTL Fcstone Inc (NASDAQ:INTL) is the most popular stock in this table. On the other hand German American Bancorp., Inc. (NASDAQ:GABC) is the least popular one with only 4 bullish hedge fund positions. UroGen Pharma Ltd. (NASDAQ:URGN) is not the most popular stock in this group but hedge fund interest is still above average. 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 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Unfortunately URGN wasn’t nearly as popular as these 15 stock and hedge funds that were betting on URGN were disappointed as the stock returned -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 15 most popular stocks) among hedge funds as 13 of these stocks already outperformed the market this year.
Disclosure: None. This article was originally published at Insider Monkey.