How do you pick the next stock to invest in? One way would be to spend hours of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding Urovant Sciences Ltd. (NASDAQ:UROV).
Urovant Sciences Ltd. (NASDAQ:UROV) investors should be aware of a decrease in enthusiasm from smart money in recent months. UROV was in 9 hedge funds’ portfolios at the end of March. There were 12 hedge funds in our database with UROV positions at the end of the previous quarter. Our calculations also showed that urov isn’t among the 30 most popular stocks among hedge funds.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 30.9% through May 30, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
We’re going to take a look at the new hedge fund action surrounding Urovant Sciences Ltd. (NASDAQ:UROV).
What have hedge funds been doing with Urovant Sciences Ltd. (NASDAQ:UROV)?
At the end of the first quarter, a total of 9 of the hedge funds tracked by Insider Monkey were long this stock, a change of -25% from the fourth quarter of 2018. Below, you can check out the change in hedge fund sentiment towards UROV over the last 15 quarters. With hedgies’ capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were upping their stakes significantly (or already accumulated large positions).
More specifically, Adage Capital Management was the largest shareholder of Urovant Sciences Ltd. (NASDAQ:UROV), with a stake worth $13.9 million reported as of the end of March. Trailing Adage Capital Management was Perceptive Advisors, which amassed a stake valued at $8.7 million. Millennium Management, Park West Asset Management, and Sio Capital were also very fond of the stock, giving the stock large weights in their portfolios.
Since Urovant Sciences Ltd. (NASDAQ:UROV) has witnessed a decline in interest from hedge fund managers, we can see that there were a few fund managers who sold off their full holdings in the third quarter. Interestingly, Ken Greenberg and David Kim’s Ghost Tree Capital cut the biggest investment of the 700 funds tracked by Insider Monkey, comprising an estimated $2 million in stock. Steve Cohen’s fund, Point72 Asset Management, also said goodbye to its stock, about $0.3 million worth. These bearish behaviors are interesting, as total hedge fund interest dropped by 3 funds in the third quarter.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Urovant Sciences Ltd. (NASDAQ:UROV) but similarly valued. These stocks are Energy Fuels Inc. (NYSE:UUUU), Denison Mines Corp (NYSE:DNN), Cedar Realty Trust Inc (NYSE:CDR), and SunOpta, Inc. (NASDAQ:STKL). All of these stocks’ market caps are similar to UROV’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| UUUU | 7 | 14766 | -2 |
| DNN | 4 | 1427 | 0 |
| CDR | 12 | 28708 | -2 |
| STKL | 11 | 114067 | -2 |
| Average | 8.5 | 39742 | -1.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 8.5 hedge funds with bullish positions and the average amount invested in these stocks was $40 million. That figure was $37 million in UROV’s case. Cedar Realty Trust Inc (NYSE:CDR) is the most popular stock in this table. On the other hand Denison Mines Corp (NYSE:DNN) is the least popular one with only 4 bullish hedge fund positions. Urovant Sciences Ltd. (NASDAQ:UROV) 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 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 UROV wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on UROV were disappointed as the stock returned -18.5% 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 so far in Q2.
Disclosure: None. This article was originally published at Insider Monkey.
