The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We have processed the filings of the more than 700 world-class investment firms that we track and now have access to the collective wisdom contained in these filings, which are based on their September 30 holdings, data that is available nowhere else. Should you consider Prevail Therapeutics Inc. (NASDAQ:PRVL) for your portfolio? We’ll look to this invaluable collective wisdom for the answer.
Is Prevail Therapeutics Inc. (NASDAQ:PRVL) a buy here? The best stock pickers are selling. The number of bullish hedge fund bets went down by 2 lately. Our calculations also showed that PRVL isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). PRVL was in 9 hedge funds’ portfolios at the end of September. There were 11 hedge funds in our database with PRVL positions at the end of the previous quarter.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
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 Russell 2000 ETFs by 40 percentage points since May 2014 (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.
Samuel Isaly of OrbiMed Advisors
We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius’ weekly trade ideas. This December we recommended Adams Energy based on an under-the-radar fund manager’s investor letter and the stock gained 20 percent. We’re going to take a look at the new hedge fund action surrounding Prevail Therapeutics Inc. (NASDAQ:PRVL).
What have hedge funds been doing with Prevail Therapeutics Inc. (NASDAQ:PRVL)?
Heading into the fourth quarter of 2019, a total of 9 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -18% from the previous quarter. The graph below displays the number of hedge funds with bullish position in PRVL over the last 17 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Prevail Therapeutics Inc. (NASDAQ:PRVL) was held by OrbiMed Advisors, which reported holding $169.7 million worth of stock at the end of September. It was followed by RA Capital Management with a $41.3 million position. Other investors bullish on the company included EcoR1 Capital, Citadel Investment Group, and Biotechnology Value Fund. In terms of the portfolio weights assigned to each position EcoR1 Capital allocated the biggest weight to Prevail Therapeutics Inc. (NASDAQ:PRVL), around 3.71% of its 13F portfolio. OrbiMed Advisors is also relatively very bullish on the stock, dishing out 3.22 percent of its 13F equity portfolio to PRVL.
Due to the fact that Prevail Therapeutics Inc. (NASDAQ:PRVL) has experienced bearish sentiment from the smart money, it’s easy to see that there were a few money managers that decided to sell off their full holdings by the end of the third quarter. Interestingly, Richard Driehaus’s Driehaus Capital said goodbye to the biggest stake of the 750 funds watched by Insider Monkey, valued at close to $3.4 million in stock. Nick Niell’s fund, Arrowgrass Capital Partners, also said goodbye to its stock, about $0.7 million worth. These bearish behaviors are important to note, as total hedge fund interest was cut by 2 funds by the end of the third quarter.
Let’s also examine hedge fund activity in other stocks similar to Prevail Therapeutics Inc. (NASDAQ:PRVL). We will take a look at Rosetta Stone Inc (NYSE:RST), Equity Bancshares, Inc. (NASDAQ:EQBK), Merus N.V. (NASDAQ:MRUS), and Arcus Biosciences, Inc. (NYSE:RCUS). This group of stocks’ market values resemble PRVL’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| RST | 15 | 79812 | 3 |
| EQBK | 6 | 41823 | 1 |
| MRUS | 8 | 139433 | 1 |
| RCUS | 11 | 52740 | -3 |
| Average | 10 | 78452 | 0.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 10 hedge funds with bullish positions and the average amount invested in these stocks was $78 million. That figure was $271 million in PRVL’s case. Rosetta Stone Inc (NYSE:RST) is the most popular stock in this table. On the other hand Equity Bancshares, Inc. (NASDAQ:EQBK) is the least popular one with only 6 bullish hedge fund positions. Prevail Therapeutics Inc. (NASDAQ:PRVL) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. A small number of hedge funds were also right about betting on PRVL as the stock returned 17.2% during the first two months of Q4 and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.
