Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track nearly 900 active prominent money managers and analyze their quarterly 13F filings. The stocks that are heavily bought by hedge funds historically outperformed the market, though there is no shortage of high profile failures like hedge funds’ 2018 losses in Facebook and Apple. Let’s take a closer look at what the funds we track think about Arena Pharmaceuticals, Inc. (NASDAQ:ARNA) in this article.
Is Arena Pharmaceuticals, Inc. (NASDAQ:ARNA) a buy right now? Money managers were getting more bullish. The number of bullish hedge fund positions advanced by 1 in recent months. Arena Pharmaceuticals, Inc. (NASDAQ:ARNA) was in 34 hedge funds’ portfolios at the end of the second quarter of 2021. The all time high for this statistic is 43. Our calculations also showed that ARNA isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings). There were 33 hedge funds in our database with ARNA positions at the end of the first quarter.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 185.4% since March 2017 and outperformed the S&P 500 ETFs by more than 79 percentage points (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Sander Gerber of Hudson Bay Capital
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, we like undervalued, EBITDA-positive growth stocks, so we are checking out stock pitches like this emerging biotech 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 we’re going to take a look at the latest hedge fund action encompassing Arena Pharmaceuticals, Inc. (NASDAQ:ARNA).
Do Hedge Funds Think ARNA Is A Good Stock To Buy Now?
At the end of the second quarter, a total of 34 of the hedge funds tracked by Insider Monkey were long this stock, a change of 3% from the first quarter of 2020. On the other hand, there were a total of 41 hedge funds with a bullish position in ARNA a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Arena Pharmaceuticals, Inc. (NASDAQ:ARNA) was held by Avoro Capital Advisors (venBio Select Advisor), which reported holding $277.9 million worth of stock at the end of June. It was followed by Alkeon Capital Management with a $119.8 million position. Other investors bullish on the company included Holocene Advisors, Farallon Capital, and Great Point Partners. In terms of the portfolio weights assigned to each position Great Point Partners allocated the biggest weight to Arena Pharmaceuticals, Inc. (NASDAQ:ARNA), around 7.23% of its 13F portfolio. Prosight Capital is also relatively very bullish on the stock, earmarking 5.84 percent of its 13F equity portfolio to ARNA.
With a general bullishness amongst the heavyweights, specific money managers have been driving this bullishness. Woodline Partners, managed by Michael Rockefeller and KarláKroeker, assembled the most valuable position in Arena Pharmaceuticals, Inc. (NASDAQ:ARNA). Woodline Partners had $28.7 million invested in the company at the end of the quarter. Christopher James’s Partner Fund Management also initiated a $23.6 million position during the quarter. The following funds were also among the new ARNA investors: Sander Gerber’s Hudson Bay Capital Management, Paul Tudor Jones’s Tudor Investment Corp, and Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Arena Pharmaceuticals, Inc. (NASDAQ:ARNA) but similarly valued. These stocks are Univar Solutions Inc (NYSE:UNVR), Portland General Electric Company (NYSE:POR), Envestnet Inc (NYSE:ENV), Black Hills Corporation (NYSE:BKH), Atlantica Sustainable Infrastructure plc (NASDAQ:AY), PennyMac Financial Services Inc (NYSE:PFSI), and LivaNova PLC (NASDAQ:LIVN). This group of stocks’ market valuations are similar to ARNA’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| UNVR | 28 | 704708 | 3 |
| POR | 21 | 70216 | 0 |
| ENV | 17 | 329409 | -1 |
| BKH | 14 | 62523 | -4 |
| AY | 14 | 41097 | 1 |
| PFSI | 26 | 686257 | 1 |
| LIVN | 36 | 901546 | 8 |
| Average | 22.3 | 399394 | 1.1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 22.3 hedge funds with bullish positions and the average amount invested in these stocks was $399 million. That figure was $757 million in ARNA’s case. LivaNova PLC (NASDAQ:LIVN) is the most popular stock in this table. On the other hand Black Hills Corporation (NYSE:BKH) is the least popular one with only 14 bullish hedge fund positions. Arena Pharmaceuticals, Inc. (NASDAQ:ARNA) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for ARNA is 75.2. 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. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. 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 21.8% in 2021 through October 11th and beat the market again by 4.4 percentage points. Unfortunately ARNA wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on ARNA were disappointed as the stock returned -11.4% since the end of June (through 10/11) 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 many of these stocks already outperformed the market since 2019.
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Disclosure: None. This article was originally published at Insider Monkey.
