Legendary investors such as Leon Cooperman and Seth Klarman earn enormous amounts of money for themselves and their investors by doing in-depth research on small-cap stocks that big brokerage houses don’t publish. Small cap stocks -especially when they are screened well- can generate substantial outperformance versus a boring index fund. That’s why we analyze the activity of those successful funds in these small-cap stocks. In the following paragraphs, we analyze Array Biopharma Inc (NASDAQ:ARRY) from the perspective of those successful funds.
Array Biopharma Inc (NASDAQ:ARRY) was in 32 hedge funds’ portfolios at the end of the third quarter of 2016. ARRY has seen a large increase in hedge fund interest in recent months. There were 17 hedge funds in our database with ARRY holdings at the end of June. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Red Rock Resorts Inc (NASDAQ:RRR), CIRCOR International, Inc. (NYSE:CIR), and Forward Pharma A/S (NASDAQ:FWP) to gather more data points.
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We care about hedge fund sentiment because historically hedge funds’ stock picks delivered strong risk adjusted returns. There are certain segments of the market where hedge funds’ stock picks performed much better than its benchmarks. For instance, the 30 most popular mid-cap stocks among the best performing hedge funds returned 18% over the last 12 months outpacing S&P 500 Index by more than 10 percentage points. We developed this strategy 2.5 years ago and started sharing its picks in our quarterly newsletter. It bested the S&P 500 Index ETFs by delivering a solid 39% vs. 22% gain for its benchmarks.
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How are hedge funds trading Array Biopharma Inc (NASDAQ:ARRY)?
At the end of the third quarter, a total of 32 of the hedge funds tracked by Insider Monkey held long positions in this stock, an increase of 88% from the second quarter of 2016. On the other hand, there were a total of 23 hedge funds with a bullish position in ARRY at the beginning of this year. 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 Insider Monkey’s hedge fund database, Jeremy Green’s Redmile Group has the most valuable position in Array Biopharma Inc (NASDAQ:ARRY), worth close to $112.4 million, amounting to 8.9% of its total 13F portfolio. The second most bullish fund manager is Samuel Isaly of OrbiMed Advisors, with a $95.7 million position; the fund has 1.1% of its 13F portfolio invested in the stock. Some other members of the smart money with similar optimism consist of Mark Lampert’s Biotechnology Value Fund, Israel Englander’s Millennium Management and Alex Denner’s Sarissa Capital Management. We should note that Sarissa Capital Management is among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.
With a general bullishness amongst the heavyweights, specific money managers were breaking ground themselves. Cormorant Asset Management, led by Bihua Chen, assembled the most outsized position in Array Biopharma Inc (NASDAQ:ARRY). Cormorant Asset Management had $7.8 million invested in the company at the end of the quarter. Richard Driehaus’ Driehaus Capital also made a $5.3 million investment in the stock during the quarter. The other funds with brand new ARRY positions are Peter Muller’s PDT Partners, Malcolm Fairbairn’s Ascend Capital, and Stuart Weisbrod’s Iguana Healthcare Management.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Array Biopharma Inc (NASDAQ:ARRY) but similarly valued. These stocks are Red Rock Resorts Inc (NASDAQ:RRR), CIRCOR International, Inc. (NYSE:CIR), Forward Pharma A/S (NASDAQ:FWP), and US Ecology Inc. (NASDAQ:ECOL). This group of stocks’ market values match ARRY’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| RRR | 17 | 185569 | -4 |
| CIR | 11 | 185417 | 4 |
| FWP | 10 | 208236 | -1 |
| ECOL | 8 | 66931 | -3 |
As you can see these stocks had an average of 12 hedge funds with bullish positions and the average amount invested in these stocks was $162 million. That figure was $395 million in ARRY’s case. Red Rock Resorts Inc (NASDAQ:RRR) is the most popular stock in this table. On the other hand US Ecology Inc. (NASDAQ:ECOL) is the least popular one with only 8 bullish hedge fund positions. Compared to these stocks Array Biopharma Inc (NASDAQ:ARRY) 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
