Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed in recent years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets hoping that they will outperform the broader market. Our research shows that certain hedge funds do have great stock picking skills (and we can identify these hedge funds in advance pretty accurately), so let’s take a glance at the smart money sentiment towards Aurinia Pharmaceuticals Inc (NASDAQ:AUPH).
Is Aurinia Pharmaceuticals Inc (NASDAQ:AUPH) worth your attention right now? Investors who are in the know are taking an optimistic view. The number of long hedge fund bets increased by 5 recently. Our calculations also showed that AUPH isn’t among the 30 most popular stocks among hedge funds. AUPH was in 13 hedge funds’ portfolios at the end of the first quarter of 2019. There were 8 hedge funds in our database with AUPH holdings at the end of the previous quarter.
If you’d ask most stock holders, hedge funds are perceived as unimportant, outdated financial tools of years past. While there are more than 8000 funds in operation today, Our researchers hone in on the moguls of this group, around 750 funds. These money managers manage most of the hedge fund industry’s total asset base, and by tracking their highest performing picks, Insider Monkey has found a number of investment strategies that have historically outstripped Mr. Market. Insider Monkey’s flagship hedge fund strategy outpaced the S&P 500 index by around 5 percentage points annually since its inception in May 2014 through June 18th. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 28.2% since February 2017 (through June 18th) even though the market was up nearly 30% during the same period. We just shared a list of 5 short targets in our latest quarterly update and they are already down an average of 8.2% in a month whereas our long picks outperformed the market by 2.5 percentage points in this volatile 5 week period (our long picks also beat the market by 15 percentage points so far this year).
We’re going to view the fresh hedge fund action regarding Aurinia Pharmaceuticals Inc (NASDAQ:AUPH).
How have hedgies been trading Aurinia Pharmaceuticals Inc (NASDAQ:AUPH)?
At the end of the first quarter, a total of 13 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 63% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards AUPH over the last 15 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists an “upper tier” of noteworthy hedge fund managers who were adding to their stakes meaningfully (or already accumulated large positions).
The largest stake in Aurinia Pharmaceuticals Inc (NASDAQ:AUPH) was held by Consonance Capital Management, which reported holding $27.4 million worth of stock at the end of March. It was followed by Polar Capital with a $21.5 million position. Other investors bullish on the company included OrbiMed Advisors, Vivo Capital, and D E Shaw.
As aggregate interest increased, specific money managers have been driving this bullishness. OrbiMed Advisors, managed by Samuel Isaly, initiated the largest position in Aurinia Pharmaceuticals Inc (NASDAQ:AUPH). OrbiMed Advisors had $20.5 million invested in the company at the end of the quarter. Jeremy Green’s Redmile Group also initiated a $2.1 million position during the quarter. The following funds were also among the new AUPH investors: Jim Simons’s Renaissance Technologies, Israel Englander’s Millennium Management, and Israel Englander’s Millennium Management.
Let’s now take a look at hedge fund activity in other stocks similar to Aurinia Pharmaceuticals Inc (NASDAQ:AUPH). These stocks are 500.com Limited (NYSE:WBAI), Gamco Investors Inc. (NYSE:GBL), Odonate Therapeutics, Inc. (NASDAQ:ODT), and Innophos Holdings, Inc. (NASDAQ:IPHS). All of these stocks’ market caps match AUPH’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| WBAI | 2 | 426 | 1 |
| GBL | 9 | 11633 | 1 |
| ODT | 9 | 339827 | -1 |
| IPHS | 11 | 44833 | -2 |
| Average | 7.75 | 99180 | -0.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 7.75 hedge funds with bullish positions and the average amount invested in these stocks was $99 million. That figure was $89 million in AUPH’s case. Innophos Holdings, Inc. (NASDAQ:IPHS) is the most popular stock in this table. On the other hand 500.com Limited (NYSE:WBAI) is the least popular one with only 2 bullish hedge fund positions. Compared to these stocks Aurinia Pharmaceuticals Inc (NASDAQ:AUPH) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. Unfortunately AUPH wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on AUPH were disappointed as the stock returned -2.2% during the same period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 13 of these stocks already outperformed the market in Q2.
Disclosure: None. This article was originally published at Insider Monkey.
