The 800+ hedge funds and famous money managers tracked by Insider Monkey have already compiled and submitted their 13F filings for the third quarter, which unveil their equity positions as of September 30. We went through these filings, fixed typos and other more significant errors and identified the changes in hedge fund portfolios. Our extensive review of these public filings is finally over, so this article is set to reveal the smart money sentiment towards Avidity Biosciences, Inc. (NASDAQ:RNA).
Is RNA a good stock to buy now? Avidity Biosciences, Inc. (NASDAQ:RNA) was in 17 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistic is 24. RNA shareholders have witnessed a decrease in support from the world’s most elite money managers of late. There were 24 hedge funds in our database with RNA positions at the end of the second quarter. Our calculations also showed that RNA isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 more than 66 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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
Oleg Nodelman of EcoR1 Capital
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. 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 let’s take a look at the recent hedge fund action regarding Avidity Biosciences, Inc. (NASDAQ:RNA).
Do Hedge Funds Think RNA Is A Good Stock To Buy Now?
Heading into the fourth quarter of 2020, a total of 17 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -29% from the second quarter of 2020. On the other hand, there were a total of 0 hedge funds with a bullish position in RNA a year ago. With the smart money’s sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were increasing their holdings substantially (or already accumulated large positions).
The largest stake in Avidity Biosciences, Inc. (NASDAQ:RNA) was held by Cormorant Asset Management, which reported holding $69.5 million worth of stock at the end of September. It was followed by EcoR1 Capital with a $59.2 million position. Other investors bullish on the company included Perceptive Advisors, Matrix Capital Management, and Alkeon Capital Management. In terms of the portfolio weights assigned to each position EcoR1 Capital allocated the biggest weight to Avidity Biosciences, Inc. (NASDAQ:RNA), around 4.22% of its 13F portfolio. Logos Capital is also relatively very bullish on the stock, earmarking 2.68 percent of its 13F equity portfolio to RNA.
Because Avidity Biosciences, Inc. (NASDAQ:RNA) has experienced falling interest from the smart money, we can see that there lies a certain “tier” of fund managers that elected to cut their positions entirely by the end of the third quarter. Intriguingly, Ken Griffin’s Citadel Investment Group dumped the biggest investment of the 750 funds monitored by Insider Monkey, worth close to $7.7 million in stock. Israel Englander’s fund, Millennium Management, also cut its stock, about $6.4 million worth. These moves are interesting, as aggregate hedge fund interest was cut by 7 funds by the end of the third quarter.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Avidity Biosciences, Inc. (NASDAQ:RNA) but similarly valued. We will take a look at Genetron Holdings Limited (NASDAQ:GTH), NANO-X IMAGING LTD (NASDAQ:NNOX), Lindsay Corporation (NYSE:LNN), Arcturus Therapeutics Holdings Inc. (NASDAQ:ARCT), Ontrak, Inc. (NASDAQ:OTRK), Safety Insurance Group, Inc. (NASDAQ:SAFT), and Cerus Corporation (NASDAQ:CERS). This group of stocks’ market valuations are similar to RNA’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| GTH | 12 | 99741 | -4 |
| NNOX | 6 | 23654 | 6 |
| LNN | 16 | 161024 | 5 |
| ARCT | 20 | 171723 | -1 |
| OTRK | 12 | 12778 | 1 |
| SAFT | 17 | 42473 | 4 |
| CERS | 12 | 112765 | -2 |
| Average | 13.6 | 89165 | 1.3 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 13.6 hedge funds with bullish positions and the average amount invested in these stocks was $89 million. That figure was $312 million in RNA’s case. Arcturus Therapeutics Holdings Inc. (NASDAQ:ARCT) is the most popular stock in this table. On the other hand NANO-X IMAGING LTD (NASDAQ:NNOX) is the least popular one with only 6 bullish hedge fund positions. Avidity Biosciences, Inc. (NASDAQ:RNA) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for RNA is 58.5. 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. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 30.7% in 2020 through December 14th and still beat the market by 15.8 percentage points. Hedge funds were also right about betting on RNA as the stock returned 16.8% since the end of Q3 (through 12/14) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Follow Avidity Biosciences Inc. (NASDAQ:RNA)
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Disclosure: None. This article was originally published at Insider Monkey.
