The market has been volatile in the last few months as the Federal Reserve finalized its rate cuts and uncertainty looms over trade negotiations with China. Small cap stocks have been hit hard as a result, as the Russell 2000 ETF (IWM) has underperformed the larger S&P 500 ETF (SPY) by more than 10 percentage points over the last 12 months. SEC filings and hedge fund investor letters indicate that the smart money seems to be paring back their overall long exposure since summer months, though some funds increased their exposure dramatically at the end of Q3 and the beginning of Q4. In this article, we analyze what the smart money thinks of Arcturus Therapeutics Ltd. (NASDAQ:ARCT) and find out how it is affected by hedge funds’ moves.
Is Arcturus Therapeutics Ltd. (NASDAQ:ARCT) a healthy stock for your portfolio? The smart money is becoming hopeful. The number of long hedge fund bets increased by 2 recently. Our calculations also showed that ARCT isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). ARCT was in 7 hedge funds’ portfolios at the end of September. There were 5 hedge funds in our database with ARCT holdings at the end of the previous quarter.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
In the 21st century investor’s toolkit there are many gauges stock market investors employ to value their stock investments. Two of the most innovative gauges are hedge fund and insider trading signals. Our researchers have shown that, historically, those who follow the best picks of the best hedge fund managers can outpace their index-focused peers by a solid amount (see the details here).
Nathan Fischel of DAFNA Capital Management
We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius’ weekly trade ideas. This December we recommended Adams Energy based on an under-the-radar fund manager’s investor letter and the stock gained 20 percent. Let’s go over the recent hedge fund action surrounding Arcturus Therapeutics Ltd. (NASDAQ:ARCT).
Hedge fund activity in Arcturus Therapeutics Ltd. (NASDAQ:ARCT)
Heading into the fourth quarter of 2019, a total of 7 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 40% from one quarter earlier. On the other hand, there were a total of 1 hedge funds with a bullish position in ARCT a year ago. With the smart money’s sentiment swirling, there exists a select group of key hedge fund managers who were boosting their stakes significantly (or already accumulated large positions).
More specifically, DAFNA Capital Management was the largest shareholder of Arcturus Therapeutics Ltd. (NASDAQ:ARCT), with a stake worth $1.8 million reported as of the end of September. Trailing DAFNA Capital Management was Sabby Capital, which amassed a stake valued at $1.3 million. Royce & Associates, Highline Capital Management, and Diametric Capital 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 Sabby Capital allocated the biggest weight to Arcturus Therapeutics Ltd. (NASDAQ:ARCT), around 0.69% of its 13F portfolio. DAFNA Capital Management is also relatively very bullish on the stock, setting aside 0.67 percent of its 13F equity portfolio to ARCT.
As one would reasonably expect, key money managers were leading the bulls’ herd. Sabby Capital, managed by Hal Mintz, created the biggest position in Arcturus Therapeutics Ltd. (NASDAQ:ARCT). Sabby Capital had $1.3 million invested in the company at the end of the quarter. Renaissance Technologies also initiated a $0.3 million position during the quarter.
Let’s now review hedge fund activity in other stocks similar to Arcturus Therapeutics Ltd. (NASDAQ:ARCT). These stocks are Nabriva Therapeutics AG-ADR (NASDAQ:NBRV), Lineage Cell Therapeutics, Inc. (NYSE:LCTX), Scully Royalty Ltd. (NYSE:SRL), and Colony Bankcorp Inc (NASDAQ:CBAN). This group of stocks’ market caps resemble ARCT’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| NBRV | 11 | 31629 | 1 |
| LCTX | 5 | 33651 | 0 |
| SRL | 2 | 10530 | 0 |
| CBAN | 3 | 9572 | -1 |
| Average | 5.25 | 21346 | 0 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 5.25 hedge funds with bullish positions and the average amount invested in these stocks was $21 million. That figure was $6 million in ARCT’s case. Nabriva Therapeutics AG-ADR (NASDAQ:NBRV) is the most popular stock in this table. On the other hand Scully Royalty Ltd. (NYSE:SRL) is the least popular one with only 2 bullish hedge fund positions. Arcturus Therapeutics Ltd. (NASDAQ:ARCT) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Hedge funds were also right about betting on ARCT, though not to the same extent, as the stock returned 8.8% during the first two months of the fourth quarter and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.
