At Insider Monkey, we pore over the filings of more than 700 top investment firms every quarter, a process we have now completed for the latest reporting period. The data we’ve gathered as a result gives us access to a wealth of collective knowledge based on these firms’ portfolio holdings as of September 30. In this article, we will use that wealth of knowledge to determine whether or not UroGen Pharma Ltd. (NASDAQ:URGN) makes for a good investment right now.
Hedge fund interest in UroGen Pharma Ltd. (NASDAQ:URGN) shares was flat at the end of last quarter. This is usually a negative indicator. At the end of this article we will also compare URGN to other stocks including Lydall, Inc. (NYSE:LDL), IRSA Propiedades Comerciales S.A. (NASDAQ:IRCP), and Insys Therapeutics Inc (NASDAQ:INSY) to get a better sense of its popularity.
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 market by 18 percentage points since May 2014 through December 3, 2018 (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 our short portfolio.
Let’s view the key hedge fund action encompassing UroGen Pharma Ltd. (NASDAQ:URGN).
Hedge fund activity in UroGen Pharma Ltd. (NASDAQ:URGN)
Heading into the fourth quarter of 2018, a total of 13 of the hedge funds tracked by Insider Monkey were bullish on this stock, no change from the previous quarter. On the other hand, there were a total of 9 hedge funds with a bullish position in URGN 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.
Among these funds, Consonance Capital Management held the most valuable stake in UroGen Pharma Ltd. (NASDAQ:URGN), which was worth $71.6 million at the end of the third quarter. On the second spot was Wildcat Capital Management which amassed $17.7 million worth of shares. Moreover, Citadel Investment Group, Highline Capital Management, and Millennium Management were also bullish on UroGen Pharma Ltd. (NASDAQ:URGN), allocating a large percentage of their portfolios to this stock.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: DSAM Partners. One hedge fund selling its entire position doesn’t always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don’t think this is the case in this case because only one of the 800+ hedge funds tracked by Insider Monkey identified as a viable investment and initiated a position in the stock (that fund was Point72 Asset Management).
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as UroGen Pharma Ltd. (NASDAQ:URGN) but similarly valued. These stocks are Lydall, Inc. (NYSE:LDL), IRSA Propiedades Comerciales S.A. (NASDAQ:IRCP), Insys Therapeutics Inc (NASDAQ:INSY), and Controladora Vuela Compañía de Aviación, S.A.B. de C.V. (NYSE:VLRS). This group of stocks’ market caps match URGN’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| LDL | 15 | 42702 | 1 |
| IRCP | 3 | 9927 | 1 |
| INSY | 5 | 35726 | 0 |
| VLRS | 5 | 64788 | -3 |
| Average | 7 | 38286 | -0.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 7 hedge funds with bullish positions and the average amount invested in these stocks was $38 million. That figure was $145 million in URGN’s case. Lydall, Inc. (NYSE:LDL) is the most popular stock in this table. On the other hand IRSA Propiedades Comerciales S.A. (NASDAQ:IRCP) is the least popular one with only 3 bullish hedge fund positions. UroGen Pharma Ltd. (NASDAQ:URGN) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard LDL might be a better candidate to consider a long position.
Disclosure: None. This article was originally published at Insider Monkey.
