We at Insider Monkey have gone over 887 13F filings that hedge funds and prominent investors are required to file by the SEC The 13F filings show the funds’ and investors’ portfolio positions as of December 31st. In this article, we look at what those funds think of Aurinia Pharmaceuticals Inc (NASDAQ:AUPH) based on that data.
Is AUPH stock a buy? Aurinia Pharmaceuticals Inc (NASDAQ:AUPH) has seen a decrease in hedge fund interest in recent months. Aurinia Pharmaceuticals Inc (NASDAQ:AUPH) was in 24 hedge funds’ portfolios at the end of December. The all time high for this statistic is 32. Our calculations also showed that AUPH isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings).
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’ 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 124 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.
Steven Cohen of Point72 Asset Management
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 check out the new hedge fund action surrounding Aurinia Pharmaceuticals Inc (NASDAQ:AUPH).
Do Hedge Funds Think AUPH Is A Good Stock To Buy Now?
At Q4’s end, a total of 24 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -25% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards AUPH over the last 22 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Aurinia Pharmaceuticals Inc (NASDAQ:AUPH) was held by Healthcor Management LP, which reported holding $95.9 million worth of stock at the end of December. It was followed by OrbiMed Advisors with a $65.7 million position. Other investors bullish on the company included Point72 Asset Management, Kingdon Capital, and Citadel Investment Group. In terms of the portfolio weights assigned to each position Healthcor Management LP allocated the biggest weight to Aurinia Pharmaceuticals Inc (NASDAQ:AUPH), around 3.7% of its 13F portfolio. Burrage Capital Management is also relatively very bullish on the stock, dishing out 3.55 percent of its 13F equity portfolio to AUPH.
Since Aurinia Pharmaceuticals Inc (NASDAQ:AUPH) has experienced bearish sentiment from the aggregate hedge fund industry, it’s safe to say that there lies a certain “tier” of funds that slashed their full holdings heading into Q1. At the top of the heap, Farallon Capital cut the biggest position of the “upper crust” of funds followed by Insider Monkey, totaling an estimated $14.7 million in stock. Aaron Cowen’s fund, Suvretta Capital Management, also sold off its stock, about $10.8 million worth. These transactions are important to note, as aggregate hedge fund interest dropped by 8 funds heading into Q1.
Let’s now take a look at hedge fund activity in other stocks similar to Aurinia Pharmaceuticals Inc (NASDAQ:AUPH). We will take a look at Otter Tail Corporation (NASDAQ:OTTR), Arbor Realty Trust, Inc. (NYSE:ABR), Prestige Consumer Healthcare Inc. (NYSE:PBH), Domtar Corporation (NYSE:UFS), Two Harbors Investment Corp (NYSE:TWO), American Assets Trust, Inc (NYSE:AAT), and Horace Mann Educators Corporation (NYSE:HMN). This group of stocks’ market valuations match AUPH’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| OTTR | 9 | 57865 | -1 |
| ABR | 14 | 68492 | 3 |
| PBH | 14 | 94118 | -3 |
| UFS | 25 | 252958 | 1 |
| TWO | 18 | 58089 | 1 |
| AAT | 14 | 39077 | -1 |
| HMN | 13 | 30961 | 0 |
| Average | 15.3 | 85937 | 0 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 15.3 hedge funds with bullish positions and the average amount invested in these stocks was $86 million. That figure was $337 million in AUPH’s case. Domtar Corporation (NYSE:UFS) is the most popular stock in this table. On the other hand Otter Tail Corporation (NASDAQ:OTTR) is the least popular one with only 9 bullish hedge fund positions. Aurinia Pharmaceuticals Inc (NASDAQ:AUPH) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for AUPH is 66.4. 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 AUPH wasn’t nearly as popular as these 30 stocks and hedge funds that were betting on AUPH were disappointed as the stock returned -13.5% 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.
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Disclosure: None. This article was originally published at Insider Monkey.
