Where Do Hedge Funds Stand On Revolution Medicines, Inc. (RVMD)?

As we already know from media reports and hedge fund investor letters, hedge funds delivered their best returns in a decade. Most investors who decided to stick with hedge funds after a rough 2018 recouped their losses by the end of the fourth quarter of 2019. A significant number of hedge funds continued their strong performance in 2020 and 2021 as well. We get to see hedge funds’ thoughts towards the market and individual stocks by aggregating their quarterly portfolio movements and reading their investor letters. In this article, we will particularly take a look at what hedge funds think about Revolution Medicines, Inc. (NASDAQ:RVMD).

Hedge fund interest in Revolution Medicines, Inc. (NASDAQ:RVMD) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that RVMD isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings). 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 Mercury General Corporation (NYSE:MCY), Proto Labs Inc (NYSE:PRLB), and Atkore Inc. (NYSE:ATKR) to gather more data points.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 115 percentage points since March 2017 (see the details here). That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

James Flynn Deerfield Management

James E. Flynn of Deerfield Management

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, economists warn of inflation flare up. So, we are checking out this backdoor gold play that has hit peak gains of 718% in a little over a year. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. Keeping this in mind we’re going to take a peek at the recent hedge fund action regarding Revolution Medicines, Inc. (NASDAQ:RVMD).

Do Hedge Funds Think RVMD Is A Good Stock To Buy Now?

Heading into the second quarter of 2021, a total of 26 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards RVMD over the last 23 quarters. With hedge funds’ capital changing hands, there exists a few noteworthy hedge fund managers who were adding to their holdings significantly (or already accumulated large positions).

The largest stake in Revolution Medicines, Inc. (NASDAQ:RVMD) was held by Biotechnology Value Fund / BVF Inc, which reported holding $135 million worth of stock at the end of December. It was followed by Cormorant Asset Management with a $115.8 million position. Other investors bullish on the company included Casdin Capital, Farallon Capital, and Deerfield Management. In terms of the portfolio weights assigned to each position Copernicus Capital Management allocated the biggest weight to Revolution Medicines, Inc. (NASDAQ:RVMD), around 7.42% of its 13F portfolio. Biotechnology Value Fund / BVF Inc is also relatively very bullish on the stock, earmarking 5.06 percent of its 13F equity portfolio to RVMD.

Judging by the fact that Revolution Medicines, Inc. (NASDAQ:RVMD) has witnessed a decline in interest from hedge fund managers, logic holds that there was a specific group of hedgies that decided to sell off their full holdings in the first quarter. It’s worth mentioning that Jerome Pfund and Michael Sjostrom’s Sectoral Asset Management sold off the largest stake of the 750 funds followed by Insider Monkey, worth close to $15.4 million in stock. Joseph Edelman’s fund, Perceptive Advisors, also dumped its stock, about $8.9 million worth. These bearish behaviors are important to note, as total 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 similar to Revolution Medicines, Inc. (NASDAQ:RVMD). These stocks are Mercury General Corporation (NYSE:MCY), Proto Labs Inc (NYSE:PRLB), Atkore Inc. (NYSE:ATKR), Insight Enterprises, Inc. (NASDAQ:NSIT), PagerDuty, Inc. (NYSE:PD), Kennametal Inc. (NYSE:KMT), and Merit Medical Systems, Inc. (NASDAQ:MMSI). All of these stocks’ market caps are closest to RVMD’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
MCY 20 178505 2
PRLB 18 515493 2
ATKR 21 174415 -1
NSIT 17 208588 -2
PD 24 676304 -2
KMT 13 349737 -1
MMSI 18 350008 -2
Average 18.7 350436 -0.6

View table here if you experience formatting issues.

As you can see these stocks had an average of 18.7 hedge funds with bullish positions and the average amount invested in these stocks was $350 million. That figure was $643 million in RVMD’s case. PagerDuty, Inc. (NYSE:PD) is the most popular stock in this table. On the other hand Kennametal Inc. (NYSE:KMT) is the least popular one with only 13 bullish hedge fund positions. Compared to these stocks Revolution Medicines, Inc. (NASDAQ:RVMD) is more popular among hedge funds. Our overall hedge fund sentiment score for RVMD is 85. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 24% in 2021 through July 9th and still beat the market by 6.7 percentage points. Unfortunately RVMD wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on RVMD were disappointed as the stock returned -28.6% since the end of the first quarter (through 7/9) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market since 2019.

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