At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Aurora Cannabis Inc. (NASDAQ:ACB).
Is Aurora Cannabis Inc. (NASDAQ:ACB) a buy here? Prominent investors are in a pessimistic mood. The number of bullish hedge fund positions shrunk by 3 in recent months. Our calculations also showed that ACB 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). ACB was in 9 hedge funds’ portfolios at the end of the first quarter of 2020. There were 12 hedge funds in our database with ACB holdings at the end of the previous quarter.
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.
Daniel Och, Founder of OZ Management
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, We take a look at lists like the 10 most profitable companies in the world to identify the compounders that are likely to deliver double digit returns. We interview hedge fund managers and ask them about their best ideas. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. 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. With all of this in mind let’s view the latest hedge fund action regarding Aurora Cannabis Inc. (NASDAQ:ACB).
How have hedgies been trading Aurora Cannabis Inc. (NASDAQ:ACB)?
At Q1’s end, a total of 9 of the hedge funds tracked by Insider Monkey were long this stock, a change of -25% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards ACB over the last 18 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.
Among these funds, Citadel Investment Group held the most valuable stake in Aurora Cannabis Inc. (NASDAQ:ACB), which was worth $4.9 million at the end of the third quarter. On the second spot was D E Shaw which amassed $3.7 million worth of shares. Renaissance Technologies, Citadel Investment Group, and OZ Management 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 OZ Management allocated the biggest weight to Aurora Cannabis Inc. (NASDAQ:ACB), around 0.01% of its 13F portfolio. D E Shaw is also relatively very bullish on the stock, setting aside 0.01 percent of its 13F equity portfolio to ACB.
Due to the fact that Aurora Cannabis Inc. (NASDAQ:ACB) has experienced falling interest from hedge fund managers, it’s safe to say that there is a sect of money managers that decided to sell off their full holdings by the end of the first quarter. It’s worth mentioning that Shashin Shah’s Think Investments dropped the biggest investment of the 750 funds watched by Insider Monkey, totaling an estimated $4.4 million in stock. Kenneth Tropin’s fund, Graham Capital Management, also dropped its stock, about $0.9 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest fell by 3 funds by the end of the first quarter.
Let’s now review hedge fund activity in other stocks similar to Aurora Cannabis Inc. (NASDAQ:ACB). These stocks are Tricida, Inc. (NASDAQ:TCDA), Kaiser Aluminum Corp. (NASDAQ:KALU), Rush Enterprises, Inc. (NASDAQ:RUSHB), and National HealthCare Corporation (NYSE:NHC). This group of stocks’ market caps are closest to ACB’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| TCDA | 24 | 462077 | 0 |
| KALU | 16 | 75036 | -1 |
| RUSHB | 3 | 27046 | -1 |
| NHC | 11 | 55616 | 0 |
| Average | 13.5 | 154944 | -0.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 13.5 hedge funds with bullish positions and the average amount invested in these stocks was $155 million. That figure was $13 million in ACB’s case. Tricida, Inc. (NASDAQ:TCDA) is the most popular stock in this table. On the other hand Rush Enterprises, Inc. (NASDAQ:RUSHB) is the least popular one with only 3 bullish hedge fund positions. Aurora Cannabis Inc. (NASDAQ:ACB) is not the least popular stock in this group but hedge fund interest is still below average. 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 13.4% in 2020 through June 22nd but beat the market by 15.9 percentage points. A small number of hedge funds were also right about betting on ACB, though not to the same extent, as the stock returned 26.2% during the second quarter and outperformed the market.
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Disclosure: None. This article was originally published at Insider Monkey.
