How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding Uniqure NV (NASDAQ:QURE) and determine whether hedge funds had an edge regarding this stock.
Uniqure NV (NASDAQ:QURE) shares haven’t seen a lot of action during the first quarter. Overall, hedge fund sentiment was unchanged. The stock was in 44 hedge funds’ portfolios at the end of the first quarter of 2020. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as BEST Inc. (NYSE:BEST), New Residential Investment Corp (NYSE:NRZ), and Vishay Intertechnology, Inc. (NYSE:VSH) to gather more data points. Our calculations also showed that QURE isn’t among the 30 most popular stocks among hedge funds (click for Q1 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.
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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 58 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 36% through May 18th. 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, this trader claims to score lucrative profits by utilizing a “weekend trading strategy”, so we look into his strategy’s picks. 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 gold prices. So, we are checking out this junior gold mining stock. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller’s investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let’s take a gander at the recent hedge fund action encompassing Uniqure NV (NASDAQ:QURE).
Hedge fund activity in Uniqure NV (NASDAQ:QURE)
At the end of the first quarter, a total of 44 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the fourth quarter of 2019. By comparison, 28 hedge funds held shares or bullish call options in QURE a year ago. With the smart money’s sentiment swirling, there exists a select group of notable hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).
Among these funds, Redmile Group held the most valuable stake in Uniqure NV (NASDAQ:QURE), which was worth $131.6 million at the end of the third quarter. On the second spot was Nantahala Capital Management which amassed $81.1 million worth of shares. Avoro Capital Advisors (venBio Select Advisor), Consonance Capital Management, and OrbiMed Advisors 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 Aquilo Capital Management allocated the biggest weight to Uniqure NV (NASDAQ:QURE), around 9.28% of its 13F portfolio. Prosight Capital is also relatively very bullish on the stock, dishing out 5.45 percent of its 13F equity portfolio to QURE.
Since Uniqure NV (NASDAQ:QURE) has witnessed declining sentiment from the smart money, it’s easy to see that there lies a certain “tier” of money managers that slashed their full holdings in the first quarter. It’s worth mentioning that Steve Cohen’s Point72 Asset Management dumped the biggest position of the “upper crust” of funds monitored by Insider Monkey, valued at about $40.9 million in stock. Israel Englander’s fund, Millennium Management, also said goodbye to its stock, about $25.5 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Uniqure NV (NASDAQ:QURE) but similarly valued. We will take a look at BEST Inc. (NYSE:BEST), New Residential Investment Corp (NYSE:NRZ), Vishay Intertechnology, Inc. (NYSE:VSH), and Simmons First National Corporation (NASDAQ:SFNC). This group of stocks’ market valuations resemble QURE’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 14 hedge funds with bullish positions and the average amount invested in these stocks was $77 million. That figure was $642 million in QURE’s case. New Residential Investment Corp (NYSE:NRZ) is the most popular stock in this table. On the other hand Simmons First National Corporation (NASDAQ:SFNC) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks Uniqure NV (NASDAQ:QURE) is more popular among hedge funds. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 12.3% in 2020 through June 30th and still beat the market by 15.5 percentage points. Unfortunately QURE wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on QURE were disappointed as the stock returned -5% during the second 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 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
Disclosure: None. This article was originally published at Insider Monkey.