Was The Smart Money Right About Crowding Into Iovance Biotherapeutics, Inc. (IOVA)?

In this article we are going to use hedge fund sentiment as a tool and determine whether Iovance Biotherapeutics, Inc. (NASDAQ:IOVA) is a good investment right now. We like to analyze hedge fund sentiment before conducting days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy League graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments and it is a fact that hedge funds’ picks don’t beat the market 100% of the time, but their consensus picks have historically done very well and have outperformed the market after adjusting for risk.

Is Iovance Biotherapeutics, Inc. (NASDAQ:IOVA) a healthy stock for your portfolio? Prominent investors were turning bullish. The number of bullish hedge fund bets rose by 4 in recent months. Iovance Biotherapeutics, Inc. (NASDAQ:IOVA) was in 43 hedge funds’ portfolios at the end of the second quarter of 2020. The all time high for this statistics is 39. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that IOVA isn’t among the 30 most popular stocks among hedge funds (click for Q2 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.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 101% since March 2017 and outperformed the S&P 500 ETFs by more than 56 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Michael Gelband of ExodusPoint Capital

At Insider Monkey we scour multiple sources to uncover the next great investment idea. Hedge fund sentiment towards Tesla reached its all time high at the end of 2019 and Tesla shares more than quadrupled this year. We are trying to identify other EV revolution winners, so we are checking out this under-the-radar lithium stock. We go through lists like the 10 best artificial intelligence stocks to pick the best growth 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 to get excerpts of these letters in your inbox. With all of this in mind we’re going to analyze the latest hedge fund action surrounding Iovance Biotherapeutics, Inc. (NASDAQ:IOVA).

What have hedge funds been doing with Iovance Biotherapeutics, Inc. (NASDAQ:IOVA)?

At the end of the second quarter, a total of 43 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 10% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in IOVA over the last 20 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in Iovance Biotherapeutics, Inc. (NASDAQ:IOVA) was held by Perceptive Advisors, which reported holding $324.2 million worth of stock at the end of September. It was followed by Avoro Capital Advisors (venBio Select Advisor) with a $284.4 million position. Other investors bullish on the company included OrbiMed Advisors, Farallon Capital, and Great Point Partners. In terms of the portfolio weights assigned to each position Great Point Partners allocated the biggest weight to Iovance Biotherapeutics, Inc. (NASDAQ:IOVA), around 8.17% of its 13F portfolio. Avoro Capital Advisors (venBio Select Advisor) is also relatively very bullish on the stock, designating 5.62 percent of its 13F equity portfolio to IOVA.

As aggregate interest increased, specific money managers have jumped into Iovance Biotherapeutics, Inc. (NASDAQ:IOVA) headfirst. Sphera Global Healthcare Fund, managed by Doron Breen and Mori Arkin, established the most outsized position in Iovance Biotherapeutics, Inc. (NASDAQ:IOVA). Sphera Global Healthcare Fund had $9.6 million invested in the company at the end of the quarter. Anand Parekh’s Alyeska Investment Group also initiated a $8.5 million position during the quarter. The following funds were also among the new IOVA investors: Donald Sussman’s Paloma Partners, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, and Michael Gelband’s ExodusPoint Capital.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Iovance Biotherapeutics, Inc. (NASDAQ:IOVA) but similarly valued. We will take a look at TFS Financial Corporation (NASDAQ:TFSL), AerCap Holdings N.V. (NYSE:AER), Manpowergroup Inc (NYSE:MAN), Integra Lifesciences Holdings Corp (NASDAQ:IART), Darling Ingredients Inc. (NYSE:DAR), BOK Financial Corporation (NASDAQ:BOKF), and Wyndham Hotels & Resorts, Inc. (NYSE:WH). This group of stocks’ market values are similar to IOVA’s market value.

View table here if you experience formatting issues.

As you can see these stocks had an average of 25.1 hedge funds with bullish positions and the average amount invested in these stocks was $415 million. That figure was $1342 million in IOVA’s case. Wyndham Hotels & Resorts, Inc. (NYSE:WH) is the most popular stock in this table. On the other hand TFS Financial Corporation (NASDAQ:TFSL) is the least popular one with only 11 bullish hedge fund positions. Compared to these stocks Iovance Biotherapeutics, Inc. (NASDAQ:IOVA) is more popular among hedge funds. Our overall hedge fund sentiment score for IOVA is 89. 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks returned 30% in 2020 through October 23rd but still managed to beat the market by 21 percentage points. Hedge funds were also right about betting on IOVA as the stock returned 37.2% since the end of June (through 10/23) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

Disclosure: None. This article was originally published at Insider Monkey.