Is ARWR Stock A Buy or Sell?

We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do (like Melvin Capital’s recent GameStop losses). However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards Arrowhead Pharmaceuticals Inc. (NASDAQ:ARWR).

Is ARWR stock a buy? Arrowhead Pharmaceuticals Inc. (NASDAQ:ARWR) shareholders have witnessed an increase in activity from the world’s largest hedge funds lately. Arrowhead Pharmaceuticals Inc. (NASDAQ:ARWR) was in 24 hedge funds’ portfolios at the end of the fourth quarter of 2020. The all time high for this statistic is 26. Our calculations also showed that ARWR isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings).

In the eyes of most traders, hedge funds are assumed to be slow, old investment tools of yesteryear. While there are more than 8000 funds in operation at the moment, Our researchers look at the aristocrats of this club, around 850 funds. Most estimates calculate that this group of people shepherd the majority of the smart money’s total asset base, and by observing their first-class investments, Insider Monkey has revealed a number of investment strategies that have historically exceeded the S&P 500 index. Insider Monkey’s flagship short hedge fund strategy exceeded the S&P 500 short ETFs by around 20 percentage points per year since its inception in March 2017. Also, our monthly newsletter’s portfolio of long stock picks returned 197% since March 2017 (through March 2021) and beat the S&P 500 Index by 124 percentage points. You can download a sample issue of this newsletter on our website.

Paul Marshall of Marshall Wace

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the CBD market is growing at a 33% annualized rate, so we are taking a closer look at this under-the-radar hemp stock. We go through lists like the 10 best biotech stocks under $10 to identify the next stock with 10x upside potential. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. With all of this in mind we’re going to take a gander at the key hedge fund action regarding Arrowhead Pharmaceuticals Inc. (NASDAQ:ARWR).

Do Hedge Funds Think ARWR Is A Good Stock To Buy Now?

At Q4’s end, a total of 24 of the hedge funds tracked by Insider Monkey were long this stock, a change of 9% from the third quarter of 2020. By comparison, 26 hedge funds held shares or bullish call options in ARWR 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.

More specifically, Perceptive Advisors was the largest shareholder of Arrowhead Pharmaceuticals Inc. (NASDAQ:ARWR), with a stake worth $82.2 million reported as of the end of December. Trailing Perceptive Advisors was Aquilo Capital Management, which amassed a stake valued at $28.1 million. Citadel Investment Group, Marshall Wace LLP, and Vivo Capital 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 Aquilo Capital Management allocated the biggest weight to Arrowhead Pharmaceuticals Inc. (NASDAQ:ARWR), around 5.84% of its 13F portfolio. Acuta Capital Partners is also relatively very bullish on the stock, setting aside 2.9 percent of its 13F equity portfolio to ARWR.

With a general bullishness amongst the heavyweights, some big names have jumped into Arrowhead Pharmaceuticals Inc. (NASDAQ:ARWR) headfirst. Perceptive Advisors, managed by Joseph Edelman, established the largest position in Arrowhead Pharmaceuticals Inc. (NASDAQ:ARWR). Perceptive Advisors had $82.2 million invested in the company at the end of the quarter. Paul Marshall and Ian Wace’s Marshall Wace LLP also initiated a $22.1 million position during the quarter. The other funds with brand new ARWR positions are Prashanth Jayaram’s Tri Locum Partners, Bhagwan Jay Rao’s Integral Health Asset Management, and Dmitry Balyasny’s Balyasny Asset Management.

Let’s check out hedge fund activity in other stocks similar to Arrowhead Pharmaceuticals Inc. (NASDAQ:ARWR). We will take a look at II-VI, Inc. (NASDAQ:IIVI), Reinsurance Group of America Inc (NYSE:RGA), Proofpoint Inc (NASDAQ:PFPT), CAE, Inc. (NYSE:CAE), Beyond Meat, Inc. (NASDAQ:BYND), Genpact Limited (NYSE:G), and Cemex SAB de CV (NYSE:CX). This group of stocks’ market caps resemble ARWR’s market cap.

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As you can see these stocks had an average of 23 hedge funds with bullish positions and the average amount invested in these stocks was $274 million. That figure was $252 million in ARWR’s case. Genpact Limited (NYSE:G) is the most popular stock in this table. On the other hand CAE, Inc. (NYSE:CAE) is the least popular one with only 10 bullish hedge fund positions. Arrowhead Pharmaceuticals Inc. (NASDAQ:ARWR) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for ARWR is 68. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. 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 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 12.3% in 2021 through April 19th and beat the market again by 0.9 percentage points. Unfortunately ARWR wasn’t nearly as popular as these 30 stocks and hedge funds that were betting on ARWR were disappointed as the stock returned -12.7% since the end of December (through 4/19) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 30 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

Disclosure: None. This article was originally published at Insider Monkey.

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