We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards Kura Oncology, Inc. (NASDAQ:KURA) and determine whether hedge funds skillfully traded this stock.
Kura Oncology, Inc. (NASDAQ:KURA) investors should be aware of an increase in activity from the world’s largest hedge funds recently. Kura Oncology, Inc. (NASDAQ:KURA) was in 31 hedge funds’ portfolios at the end of the second quarter of 2020. The all time high for this statistics is 23. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that KURA isn’t among the 30 most popular stocks among hedge funds (click for Q2 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.
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 101% since March 2017 and outperformed the S&P 500 ETFs by more than 56 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Oleg Nodelman of EcoR1 Capital
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, this “mom” trader turned $2000 into $2 million within 2 years. So, we are checking out her best trade idea of the month. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. With all of this in mind we’re going to take a peek at the key hedge fund action regarding Kura Oncology, Inc. (NASDAQ:KURA).
What have hedge funds been doing with Kura Oncology, Inc. (NASDAQ:KURA)?
Heading into the third quarter of 2020, a total of 31 of the hedge funds tracked by Insider Monkey were long this stock, a change of 35% from one quarter earlier. By comparison, 22 hedge funds held shares or bullish call options in KURA 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.
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, EcoR1 Capital, managed by Oleg Nodelman, holds the most valuable position in Kura Oncology, Inc. (NASDAQ:KURA). EcoR1 Capital has a $75.1 million position in the stock, comprising 5.5% of its 13F portfolio. On EcoR1 Capital’s heels is Mark Lampert of Biotechnology Value Fund / BVF Inc, with a $45.2 million position; 2.8% of its 13F portfolio is allocated to the company. Other members of the smart money with similar optimism contain Phill Gross and Robert Atchinson’s Adage Capital Management, Behzad Aghazadeh’s Avoro Capital Advisors (venBio Select Advisor) and Albert Cha and Frank Kung’s Vivo Capital. In terms of the portfolio weights assigned to each position EcoR1 Capital allocated the biggest weight to Kura Oncology, Inc. (NASDAQ:KURA), around 5.55% of its 13F portfolio. Prosight Capital is also relatively very bullish on the stock, earmarking 4.79 percent of its 13F equity portfolio to KURA.
As aggregate interest increased, key money managers were leading the bulls’ herd. Avoro Capital Advisors (venBio Select Advisor), managed by Behzad Aghazadeh, initiated the most outsized position in Kura Oncology, Inc. (NASDAQ:KURA). Avoro Capital Advisors (venBio Select Advisor) had $17.1 million invested in the company at the end of the quarter. Albert Cha and Frank Kung’s Vivo Capital also made a $17.1 million investment in the stock during the quarter. The following funds were also among the new KURA investors: Brandon Haley’s Holocene Advisors, Doron Breen and Mori Arkin’s Sphera Global Healthcare Fund, and Steve Cohen’s Point72 Asset Management.
Let’s check out hedge fund activity in other stocks similar to Kura Oncology, Inc. (NASDAQ:KURA). We will take a look at Stock Yards Bancorp, Inc. (NASDAQ:SYBT), 1st Source Corporation (NASDAQ:SRCE), Community Healthcare Trust Inc (NYSE:CHCT), TriCo Bancshares (NASDAQ:TCBK), Core Laboratories N.V. (NYSE:CLB), Ultra Clean Holdings Inc (NASDAQ:UCTT), and Colony Credit Real Estate, Inc. (NYSE:CLNC). This group of stocks’ market caps are similar to KURA’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SYBT | 8 | 15674 | 1 |
| SRCE | 10 | 23265 | 1 |
| CHCT | 15 | 93589 | 3 |
| TCBK | 11 | 30590 | 1 |
| CLB | 19 | 150594 | 3 |
| UCTT | 22 | 106493 | -2 |
| CLNC | 6 | 36919 | -5 |
| Average | 13 | 65303 | 0.3 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 13 hedge funds with bullish positions and the average amount invested in these stocks was $65 million. That figure was $295 million in KURA’s case. Ultra Clean Holdings Inc (NASDAQ:UCTT) is the most popular stock in this table. On the other hand Colony Credit Real Estate, Inc. (NYSE:CLNC) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks Kura Oncology, Inc. (NASDAQ:KURA) is more popular among hedge funds. Our overall hedge fund sentiment score for KURA is 90. 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. 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 returned 23.8% in 2020 through September 14th but still managed to beat the market by 17.6 percentage points. Hedge funds were also right about betting on KURA as the stock returned 78.8% since the end of June and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
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Disclosure: None. This article was originally published at Insider Monkey.
