Is AVROBIO, Inc. (NASDAQ:AVRO) a good stock to buy right now? We at Insider Monkey like to examine what billionaires and hedge funds think of a company before doing days of research on it. Given their 2 and 20 payment structure, hedge funds have more resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also have numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.
AVROBIO, Inc. (NASDAQ:AVRO) shareholders have witnessed a decrease in activity from the world’s largest hedge funds recently. Our calculations also showed that AVRO isn’t among the 30 most popular stocks among hedge funds.
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 check out the fresh hedge fund action encompassing AVROBIO, Inc. (NASDAQ:AVRO).
What have hedge funds been doing with AVROBIO, Inc. (NASDAQ:AVRO)?
At Q3’s end, a total of 14 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -26% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards AVRO over the last 13 quarters. With the smart money’s capital changing hands, there exists a few key hedge fund managers who were adding to their holdings considerably (or already accumulated large positions).
Among these funds, Cormorant Asset Management held the most valuable stake in AVROBIO, Inc. (NASDAQ:AVRO), which was worth $77.4 million at the end of the third quarter. On the second spot was Citadel Investment Group which amassed $77.4 million worth of shares. Moreover, Farallon Capital, Millennium Management, and OrbiMed Advisors were also bullish on AVROBIO, Inc. (NASDAQ:AVRO), allocating a large percentage of their portfolios to this stock.
Due to the fact that AVROBIO, Inc. (NASDAQ:AVRO) has faced falling interest from hedge fund managers, we can see that there is a sect of funds that slashed their full holdings in the third quarter. It’s worth mentioning that Ken Greenberg and David Kim’s Ghost Tree Capital sold off the largest investment of all the hedgies tracked by Insider Monkey, valued at an estimated $6.6 million in stock. James E. Flynn’s fund, Deerfield Management, also said goodbye to its stock, about $5.7 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest fell by 5 funds in the third quarter.
Let’s now review hedge fund activity in other stocks similar to AVROBIO, Inc. (NASDAQ:AVRO). We will take a look at Geopark Ltd (NYSE:GPRK), Hess Midstream Partners LP (NYSE:HESM), iShares MSCI Europe Financials ETF (NASDAQ:EUFN), and Stratasys, Ltd. (NASDAQ:SSYS). This group of stocks’ market values match AVRO’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| GPRK | 10 | 84765 | -1 |
| HESM | 6 | 9071 | 1 |
| EUFN | 2 | 86190 | 0 |
| SSYS | 14 | 112124 | 2 |
| Average | 8 | 73038 | 0.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 8 hedge funds with bullish positions and the average amount invested in these stocks was $73 million. That figure was $250 million in AVRO’s case. Stratasys, Ltd. (NASDAQ:SSYS) is the most popular stock in this table. On the other hand iShares MSCI Europe Financials ETF (NASDAQ:EUFN) is the least popular one with only 2 bullish hedge fund positions. AVROBIO, Inc. (NASDAQ:AVRO) 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 SSYS might be a better candidate to consider a long position.
Disclosure: None. This article was originally published at Insider Monkey.