“Value has performed relatively poorly since the 2017 shift, but we believe challenges to the S&P 500’s dominance are mounting and resulting active opportunities away from the index are growing. At some point, this fault line will break, likely on the back of rising rates, and all investors will be reminded that the best time to diversify away from the winners is when it is most painful. The bargain of capturing long-term value may be short-term pain, but enough is eventually enough and it comes time to harvest the benefits.,” said Clearbridge Investments in its market commentary. We aren’t sure whether long-term interest rates will top 5% and value stocks outperform growth, but we follow hedge fund investor letters to understand where the markets and stocks might be going. That’s why we believe it would be worthwhile to take a look at the hedge fund sentiment on Arena Pharmaceuticals, Inc. (NASDAQ:ARNA) in order to identify whether reputable and successful top money managers continue to believe in its potential.
Is Arena Pharmaceuticals, Inc. (NASDAQ:ARNA) the right investment to pursue these days? Investors who are in the know are buying. The number of bullish hedge fund positions advanced by 2 lately. Our calculations also showed that arna isn’t among the 30 most popular stocks among hedge funds. ARNA was in 25 hedge funds’ portfolios at the end of the third quarter of 2018. There were 23 hedge funds in our database with ARNA holdings at the end of the previous quarter.
Why do we pay any attention at all to hedge fund sentiment? 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 18 percentage points since May 2014 through December 3, 2018 (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 24% through December 3, 2018. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
We’re going to analyze the latest hedge fund action surrounding Arena Pharmaceuticals, Inc. (NASDAQ:ARNA).
What have hedge funds been doing with Arena Pharmaceuticals, Inc. (NASDAQ:ARNA)?
At the end of the third quarter, a total of 25 of the hedge funds tracked by Insider Monkey were long this stock, a change of 9% from one quarter earlier. By comparison, 19 hedge funds held shares or bullish call options in ARNA heading into this year. With hedgies’ positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).
The largest stake in Arena Pharmaceuticals, Inc. (NASDAQ:ARNA) was held by Partner Fund Management, which reported holding $125.6 million worth of stock at the end of September. It was followed by Perceptive Advisors with a $62.9 million position. Other investors bullish on the company included Alyeska Investment Group, Point72 Asset Management, and Citadel Investment Group.
As aggregate interest increased, specific money managers have jumped into Arena Pharmaceuticals, Inc. (NASDAQ:ARNA) headfirst. Laurion Capital Management, managed by Benjamin A. Smith, initiated the largest position in Arena Pharmaceuticals, Inc. (NASDAQ:ARNA). Laurion Capital Management had $1 million invested in the company at the end of the quarter. Michael Platt and William Reeves’s BlueCrest Capital Mgmt. also initiated a $0.5 million position during the quarter. The following funds were also among the new ARNA investors: Sander Gerber’s Hudson Bay Capital Management, Jerome Pfund and Michael Sjostrom’s Sectoral Asset Management, and Murray Stahl’s Horizon Asset Management.
Let’s check out hedge fund activity in other stocks similar to Arena Pharmaceuticals, Inc. (NASDAQ:ARNA). We will take a look at B2Gold Corp (NYSEMKT:BTG), Cambrex Corporation (NYSE:CBM), Compass Minerals International, Inc. (NYSE:CMP), and Dominion Energy Midstream Partners, LP (NYSE:DM). All of these stocks’ market caps are similar to ARNA’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| BTG | 14 | 65025 | 2 |
| CBM | 17 | 46892 | 2 |
| CMP | 11 | 117405 | -1 |
| DM | 4 | 12285 | 3 |
| Average | 11.5 | 60402 | 1.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 11.5 hedge funds with bullish positions and the average amount invested in these stocks was $60 million. That figure was $412 million in ARNA’s case. Cambrex Corporation (NYSE:CBM) is the most popular stock in this table. On the other hand The Dolan Company (NYSE:DM) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks Arena Pharmaceuticals, Inc. (NASDAQ:ARNA) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.
Disclosure: None. This article was originally published at Insider Monkey.
