In this article we will take a look at whether hedge funds think Arbutus Biopharma Corp (NASDAQ:ABUS) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.
Is Arbutus Biopharma Corp (NASDAQ:ABUS) worth your attention right now? Hedge funds are in a pessimistic mood. The number of long hedge fund bets retreated by 2 lately. Our calculations also showed that ABUS isn’t among the 30 most popular stocks among hedge funds (click for Q1 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.
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 S&P 500 ETFs by more than 58 percentage points since March 2017 (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 stocks that are in our short portfolio.
Steven Cohen of Point72 Asset Management
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out stocks recommended/scorned by legendary Bill Miller. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind let’s take a glance at the new hedge fund action regarding Arbutus Biopharma Corp (NASDAQ:ABUS).
What have hedge funds been doing with Arbutus Biopharma Corp (NASDAQ:ABUS)?
Heading into the second quarter of 2020, a total of 7 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -22% from one quarter earlier. On the other hand, there were a total of 9 hedge funds with a bullish position in ABUS a year ago. With hedge funds’ positions undergoing their usual ebb and flow, there exists an “upper tier” of noteworthy hedge fund managers who were increasing their stakes significantly (or already accumulated large positions).
More specifically, Citadel Investment Group was the largest shareholder of Arbutus Biopharma Corp (NASDAQ:ABUS), with a stake worth $2.5 million reported as of the end of September. Trailing Citadel Investment Group was Millennium Management, which amassed a stake valued at $0.9 million. Hudson Bay Capital Management, Hound Partners, and Acuta Capital Partners 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 Acuta Capital Partners allocated the biggest weight to Arbutus Biopharma Corp (NASDAQ:ABUS), around 0.13% of its 13F portfolio. Hound Partners is also relatively very bullish on the stock, dishing out 0.05 percent of its 13F equity portfolio to ABUS.
Because Arbutus Biopharma Corp (NASDAQ:ABUS) has experienced a decline in interest from the entirety of the hedge funds we track, we can see that there exists a select few money managers that slashed their positions entirely in the first quarter. It’s worth mentioning that Steve Cohen’s Point72 Asset Management dropped the biggest stake of the “upper crust” of funds watched by Insider Monkey, totaling about $5.3 million in stock, and Ari Zweiman’s 683 Capital Partners was right behind this move, as the fund dumped about $0.2 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest was cut by 2 funds in the first quarter.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Arbutus Biopharma Corp (NASDAQ:ABUS) but similarly valued. We will take a look at Citizens Community Bancorp Inc. (NASDAQ:CZWI), Century Casinos, Inc. (NASDAQ:CNTY), Greenlane Holdings, Inc. (NASDAQ:GNLN), and Orgenesis Inc. (NASDAQ:ORGS). This group of stocks’ market values match ABUS’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CZWI | 6 | 10048 | -1 |
| CNTY | 8 | 13239 | -4 |
| GNLN | 6 | 2321 | 2 |
| ORGS | 2 | 4358 | 1 |
| Average | 5.5 | 7492 | -0.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 5.5 hedge funds with bullish positions and the average amount invested in these stocks was $7 million. That figure was $5 million in ABUS’s case. Century Casinos, Inc. (NASDAQ:CNTY) is the most popular stock in this table. On the other hand Orgenesis Inc. (NASDAQ:ORGS) is the least popular one with only 2 bullish hedge fund positions. Arbutus Biopharma Corp (NASDAQ:ABUS) is not the most popular stock in this group but hedge fund interest is still above average. 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 gained 13.9% in 2020 through June 10th but still beat the market by 14.2 percentage points. Hedge funds were also right about betting on ABUS as the stock returned 83.2% in Q2 (through June 10th) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.
