“October lived up to its scary reputation—the S&P 500 falling in the month by the largest amount in the last 40 years, the only worse Octobers being ’08 and the Crash of ’87. For perspective, there have been only 5 occasions in those 40 years when the S&P 500 declined by greater than 20% from peak to trough. Other than the ’87 Crash, all were during recessions. There were 17 other instances, over the same time frame, when the market fell by over 10% but less than 20%. Furthermore, this is the 18th correction of 5% or more since the current bull market started in March ’09. Corrections are the norm. They can be healthy as they often undo market complacency—overbought levels—potentially allowing the market to base and move even higher.” This is how Trapeze Asset Management summarized the recent market moves in its investor letter. We pay attention to what hedge funds are doing in a particular stock before considering a potential investment because it works for us. So let’s take a glance at the smart money sentiment towards one of the stocks hedge funds invest in.
Clovis Oncology Inc (NASDAQ:CLVS) investors should be aware of a decrease in hedge fund interest recently. CLVS was in 24 hedge funds’ portfolios at the end of December. There were 32 hedge funds in our database with CLVS holdings at the end of the previous quarter. Our calculations also showed that CLVS isn’t among the 30 most popular stocks among hedge funds.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the market by 32 percentage points since May 2014 through March 12, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.
We’re going to go over the latest hedge fund action surrounding Clovis Oncology Inc (NASDAQ:CLVS).
What have hedge funds been doing with Clovis Oncology Inc (NASDAQ:CLVS)?
At the end of the fourth quarter, a total of 24 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -25% from the previous quarter. On the other hand, there were a total of 39 hedge funds with a bullish position in CLVS a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
When looking at the institutional investors followed by Insider Monkey, Palo Alto Investors, managed by William Leland Edwards, holds the number one position in Clovis Oncology Inc (NASDAQ:CLVS). Palo Alto Investors has a $94.1 million position in the stock, comprising 5% of its 13F portfolio. Coming in second is Armistice Capital, led by Steven Boyd, holding a $90.4 million position; the fund has 6.9% of its 13F portfolio invested in the stock. Remaining professional money managers that are bullish consist of Jeremy Green’s Redmile Group, Stephen DuBois’s Camber Capital Management and Samuel Isaly’s OrbiMed Advisors.
Judging by the fact that Clovis Oncology Inc (NASDAQ:CLVS) has faced a decline in interest from hedge fund managers, we can see that there was a specific group of money managers that decided to sell off their entire stakes by the end of the third quarter. It’s worth mentioning that Christopher James’s Partner Fund Management said goodbye to the biggest stake of all the hedgies monitored by Insider Monkey, totaling close to $56.6 million in stock, and Behzad Aghazadeh’s venBio Select Advisor was right behind this move, as the fund said goodbye to about $33.7 million worth. These transactions are important to note, as aggregate hedge fund interest was cut by 8 funds by the end of the third quarter.
Let’s check out hedge fund activity in other stocks similar to Clovis Oncology Inc (NASDAQ:CLVS). These stocks are MACOM Technology Solutions Holdings, Inc. (NASDAQ:MTSI), Tennant Company (NYSE:TNC), InflaRx N.V. (NASDAQ:IFRX), and Constellium NV (NYSE:CSTM). This group of stocks’ market valuations are similar to CLVS’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| MTSI | 15 | 108054 | 5 |
| TNC | 10 | 62023 | -1 |
| IFRX | 13 | 327409 | -1 |
| CSTM | 32 | 234205 | -3 |
| Average | 17.5 | 182923 | 0 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 17.5 hedge funds with bullish positions and the average amount invested in these stocks was $183 million. That figure was $452 million in CLVS’s case. Constellium NV (NYSE:CSTM) is the most popular stock in this table. On the other hand Tennant Company (NYSE:TNC) is the least popular one with only 10 bullish hedge fund positions. Clovis Oncology Inc (NASDAQ:CLVS) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Unfortunately CLVS wasn’t nearly as popular as these 15 stock and hedge funds that were betting on CLVS were disappointed as the stock returned 13.1% and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 15 most popular stocks) among hedge funds as 13 of these stocks already outperformed the market this year.
Disclosure: None. This article was originally published at Insider Monkey.
