Looking for high-potential stocks? Just follow the big players within the hedge fund industry. Why should you do so? Let’s take a brief look at what statistics have to say about hedge funds’ stock picking abilities to illustrate. The Standard and Poor’s 500 Index returned approximately 7.6% in the 12 months ending November 21, with more than 51% of the stocks in the index failing to beat the benchmark. Therefore, the odds that one will pin down a winner by randomly picking a stock are less than the odds in a fair coin-tossing game. Conversely, best performing hedge funds’ 30 preferred mid-cap stocks generated a return of 18% during the same 12-month period. Coincidence? It might happen to be so, but it is unlikely. Our research covering a 17-year period indicates that hedge funds’ stock picks generate superior risk-adjusted returns. That’s why we believe it is wise to check hedge fund activity before you invest your time or your savings on a stock like Nivalis Therapeutics Inc (NASDAQ:NVLS).
Is Nivalis Therapeutics Inc (NASDAQ:NVLS) a good stock to buy now? Prominent investors are actually becoming more confident. The number of bullish hedge fund bets strengthened by 1 recently. NVLS was in 13 hedge funds’ portfolios at the end of September. There were 12 hedge funds in our database with NVLS positions at the end of the previous quarter. At the end of this article we will also compare NVLS to other stocks including Xerium Technologies, Inc. (NYSE:XRM), Corium International Inc (NASDAQ:CORI), and Delta Apparel, Inc. (NYSEAMEX:DLA) to get a better sense of its popularity.
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At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.
Hedge fund activity in Nivalis Therapeutics Inc (NASDAQ:NVLS)
At the end of the third quarter, a total of 13 of the hedge funds tracked by Insider Monkey were long this stock, a gain of 8% from the second quarter of 2016. Below, you can check out the change in hedge fund sentiment towards NVLS over the last 5 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Of the funds tracked by Insider Monkey, Deerfield Management, led by James E. Flynn, holds the most valuable position in Nivalis Therapeutics Inc (NASDAQ:NVLS). Deerfield Management has a $30.3 million position in the stock, comprising 1.4% of its 13F portfolio. On Deerfield Management’s heels is Biotechnology Value Fund / BVF Inc, led by Mark Lampert, holding a $13.9 million position; 2.6% of its 13F portfolio is allocated to the company. Some other professional money managers that hold long positions consist of Julian Robertson’s Tiger Management, Mark Kingdon’s Kingdon Capital and Kris Jenner, Gordon Bussard, Graham McPhail’s Rock Springs Capital Management. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.
Consequently, some big names have jumped into Nivalis Therapeutics Inc (NASDAQ:NVLS) headfirst. OrbiMed Advisors, led by Samuel Isaly, created the most outsized position in Nivalis Therapeutics Inc (NASDAQ:NVLS). OrbiMed Advisors had $0.5 million invested in the company at the end of the quarter. Philip Hempleman’s Ardsley Partners also initiated a $0.1 million position during the quarter.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Nivalis Therapeutics Inc (NASDAQ:NVLS) but similarly valued. These stocks are Xerium Technologies, Inc. (NYSE:XRM), Corium International Inc (NASDAQ:CORI), Delta Apparel, Inc. (NYSEAMEX:DLA), and ArQule, Inc. (NASDAQ:ARQL). This group of stocks’ market values are similar to NVLS’s market value.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
As you can see these stocks had an average of 6 hedge funds with bullish positions and the average amount invested in these stocks was $20 million. That figure was $63 million in NVLS’s case. Xerium Technologies, Inc. (NYSE:XRM) is the most popular stock in this table. On the other hand Delta Apparel, Inc. (NYSEAMEX:DLA) is the least popular one with only 2 bullish hedge fund positions. Compared to these stocks Nivalis Therapeutics Inc (NASDAQ:NVLS) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.