In this article we will check out the progression of hedge fund sentiment towards Verona Pharma plc (NASDAQ:VRNA) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.
Is VRNA a good stock to buy now? Verona Pharma plc (NASDAQ:VRNA) shareholders have witnessed an increase in activity from the world’s largest hedge funds lately. Verona Pharma plc (NASDAQ:VRNA) was in 11 hedge funds’ portfolios at the end of September. The all time high for this statistics is 5. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. There were 4 hedge funds in our database with VRNA holdings at the end of June. Our calculations also showed that VRNA 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.
In the 21st century investor’s toolkit there are dozens of gauges shareholders employ to evaluate publicly traded companies. A duo of the best gauges are hedge fund and insider trading activity. Our experts have shown that, historically, those who follow the best picks of the best fund managers can trounce their index-focused peers by a superb amount (see the details here).
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 take a gander at the latest hedge fund action encompassing Verona Pharma plc (NASDAQ:VRNA).
Do Hedge Funds Think VRNA Is A Good Stock To Buy Now?
Heading into the fourth quarter of 2020, a total of 11 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 175% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in VRNA over the last 21 quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were increasing their holdings significantly (or already accumulated large positions).
Among these funds, OrbiMed Advisors held the most valuable stake in Verona Pharma plc (NASDAQ:VRNA), which was worth $35.5 million at the end of the third quarter. On the second spot was RA Capital Management which amassed $31.8 million worth of shares. Vivo Capital, Perceptive Advisors, and Samsara BioCapital 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 Foresite Capital allocated the biggest weight to Verona Pharma plc (NASDAQ:VRNA), around 5.16% of its 13F portfolio. Samsara BioCapital is also relatively very bullish on the stock, designating 1.93 percent of its 13F equity portfolio to VRNA.
As aggregate interest increased, some big names have jumped into Verona Pharma plc (NASDAQ:VRNA) headfirst. RA Capital Management, managed by Peter Kolchinsky, created the largest position in Verona Pharma plc (NASDAQ:VRNA). RA Capital Management had $31.8 million invested in the company at the end of the quarter. Joseph Edelman’s Perceptive Advisors also initiated a $18 million position during the quarter. The other funds with new positions in the stock are Jim Tananbaum’s Foresite Capital, Brian Ashford-Russell and Tim Woolley’s Polar Capital, and Doron Breen and Mori Arkin’s Sphera Global Healthcare Fund.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Verona Pharma plc (NASDAQ:VRNA) but similarly valued. These stocks are Spero Therapeutics (NASDAQ:SPRO), Kimball Electronics Inc (NASDAQ:KE), Casper Sleep Inc. (NYSE:CSPR), Genco Shipping & Trading Limited (NYSE:GNK), CURO Group Holdings Corp. (NYSE:CURO), Cheetah Mobile Inc (NYSE:CMCM), and MidWestOne Financial Group, Inc. (NASDAQ:MOFG). This group of stocks’ market valuations are similar to VRNA’s market valuation.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
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As you can see these stocks had an average of 9.4 hedge funds with bullish positions and the average amount invested in these stocks was $42 million. That figure was $137 million in VRNA’s case. Kimball Electronics Inc (NASDAQ:KE) is the most popular stock in this table. On the other hand Cheetah Mobile Inc (NYSE:CMCM) is the least popular one with only 4 bullish hedge fund positions. Verona Pharma plc (NASDAQ:VRNA) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for VRNA is 78.9. 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 32.9% in 2020 through December 8th and still beat the market by 16.2 percentage points. Hedge funds were also right about betting on VRNA as the stock returned 26.1% since the end of Q3 (through 12/8) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.