Hedge Funds Are Cashing Out Of Arcus Biosciences, Inc. (RCUS)

Out of thousands of stocks that are currently traded on the market, it is difficult to identify those that will really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of nearly 900 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has the potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about Arcus Biosciences, Inc. (NYSE:RCUS).

Is Arcus Biosciences, Inc. (NYSE:RCUS) a safe investment today? Hedge funds were taking a pessimistic view. The number of long hedge fund positions went down by 5 recently. Arcus Biosciences, Inc. (NYSE:RCUS) was in 22 hedge funds’ portfolios at the end of the second quarter of 2021. The all time high for this statistic is 31. Our calculations also showed that RCUS isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).

So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 S&P 500 ETFs by more than 79 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.

Oleg Nodelman of EcoR1 Capital

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV 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. Now let’s review the fresh hedge fund action regarding Arcus Biosciences, Inc. (NYSE:RCUS).

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

At the end of June, a total of 22 of the hedge funds tracked by Insider Monkey were long this stock, a change of -19% from the previous quarter. By comparison, 28 hedge funds held shares or bullish call options in RCUS a year ago. With the smart money’s sentiment swirling, there exists a few noteworthy hedge fund managers who were upping their stakes significantly (or already accumulated large positions).

Among these funds, Partner Fund Management held the most valuable stake in Arcus Biosciences, Inc. (NYSE:RCUS), which was worth $96.1 million at the end of the second quarter. On the second spot was EcoR1 Capital which amassed $91.6 million worth of shares. Biotechnology Value Fund / BVF Inc, Woodline Partners, and Octagon Capital 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 Octagon Capital Advisors allocated the biggest weight to Arcus Biosciences, Inc. (NYSE:RCUS), around 4.32% of its 13F portfolio. EcoR1 Capital is also relatively very bullish on the stock, dishing out 3.42 percent of its 13F equity portfolio to RCUS.

Due to the fact that Arcus Biosciences, Inc. (NYSE:RCUS) has experienced declining sentiment from the entirety of the hedge funds we track, it’s easy to see that there is a sect of hedge funds who were dropping their full holdings in the second quarter. Interestingly, Arthur B Cohen and Joseph Healey’s Healthcor Management LP dropped the largest position of all the hedgies watched by Insider Monkey, valued at about $15.1 million in stock. Paul Marshall and Ian Wace’s fund, Marshall Wace LLP, also dropped its stock, about $3.3 million worth. These bearish behaviors are important to note, as total hedge fund interest was cut by 5 funds in the second quarter.

Let’s now take a look at hedge fund activity in other stocks similar to Arcus Biosciences, Inc. (NYSE:RCUS). We will take a look at Washington Real Estate Investment Trust (NYSE:WRE), iRhythm Technologies, Inc. (NASDAQ:IRTC), Inovio Pharmaceuticals Inc (NASDAQ:INO), ACM Research, Inc. (NASDAQ:ACMR), Carpenter Technology Corporation (NYSE:CRS), Palomar Holdings, Inc. (NASDAQ:PLMR), and Docebo Inc. (NASDAQ:DCBO). This group of stocks’ market caps are similar to RCUS’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 11 hedge funds with bullish positions and the average amount invested in these stocks was $132 million. That figure was $404 million in RCUS’s case. iRhythm Technologies, Inc. (NASDAQ:IRTC) is the most popular stock in this table. On the other hand Palomar Holdings, Inc. (NASDAQ:PLMR) is the least popular one with only 6 bullish hedge fund positions. Arcus Biosciences, Inc. (NYSE:RCUS) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for RCUS is 71.3. 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 October 22nd and still beat the market by 1.6 percentage points. Hedge funds were also right about betting on RCUS as the stock returned 28.7% since the end of Q2 (through 10/22) 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.