In this article we will check out the progression of hedge fund sentiment towards Provention Bio, Inc. (NASDAQ:PRVB) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.
Provention Bio, Inc. (NASDAQ:PRVB) has experienced a decrease in enthusiasm from smart money lately. PRVB was in 8 hedge funds’ portfolios at the end of the first quarter of 2020. There were 9 hedge funds in our database with PRVB positions at the end of the previous quarter. Our calculations also showed that PRVB 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.
At the moment there are many formulas stock traders use to analyze publicly traded companies. Two of the less known formulas are hedge fund and insider trading indicators. Our researchers have shown that, historically, those who follow the top picks of the best hedge fund managers can outpace the broader indices by a significant margin (see the details here).
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. Keeping this in mind we’re going to take a look at the latest hedge fund action encompassing Provention Bio, Inc. (NASDAQ:PRVB).
How have hedgies been trading Provention Bio, Inc. (NASDAQ:PRVB)?
Heading into the second quarter of 2020, a total of 8 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -11% from the previous quarter. By comparison, 2 hedge funds held shares or bullish call options in PRVB a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Perceptive Advisors was the largest shareholder of Provention Bio, Inc. (NASDAQ:PRVB), with a stake worth $27.7 million reported as of the end of September. Trailing Perceptive Advisors was Millennium Management, which amassed a stake valued at $5.3 million. Segantii Capital, Opaleye Management, and Renaissance Technologies 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 Perceptive Advisors allocated the biggest weight to Provention Bio, Inc. (NASDAQ:PRVB), around 0.72% of its 13F portfolio. Opaleye Management is also relatively very bullish on the stock, earmarking 0.4 percent of its 13F equity portfolio to PRVB.
Seeing as Provention Bio, Inc. (NASDAQ:PRVB) has witnessed a decline in interest from the aggregate hedge fund industry, logic holds that there exists a select few hedge funds that decided to sell off their entire stakes heading into Q4. Interestingly, Benjamin A. Smith’s Laurion Capital Management dropped the biggest investment of the 750 funds tracked by Insider Monkey, totaling about $1 million in stock, and Jonathan Auerbach’s Hound Partners was right behind this move, as the fund sold off about $0.5 million worth. These bearish behaviors are important to note, as total hedge fund interest fell by 1 funds heading into Q4.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Provention Bio, Inc. (NASDAQ:PRVB) but similarly valued. These stocks are National Energy Services Reunited Corp. (NASDAQ:NESR), China Yuchai International Limited (NYSE:CYD), HarborOne Bancorp, Inc. (NASDAQ:HONE), and Interface, Inc. (NASDAQ:TILE). This group of stocks’ market valuations are closest to PRVB’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| NESR | 5 | 17598 | -3 |
| CYD | 6 | 50209 | 0 |
| HONE | 12 | 28959 | -1 |
| TILE | 15 | 17906 | -5 |
| Average | 9.5 | 28668 | -2.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 9.5 hedge funds with bullish positions and the average amount invested in these stocks was $29 million. That figure was $39 million in PRVB’s case. Interface, Inc. (NASDAQ:TILE) is the most popular stock in this table. On the other hand National Energy Services Reunited Corp. (NASDAQ:NESR) is the least popular one with only 5 bullish hedge fund positions. Provention Bio, Inc. (NASDAQ:PRVB) 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 12.2% in 2020 through June 17th and still beat the market by 14.8 percentage points. A small number of hedge funds were also right about betting on PRVB as the stock returned 66.5% during the second quarter and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.
