Hedge funds don’t get the respect they used to get. Nowadays investors prefer passive funds over actively managed funds. One thing they don’t realize is that 100% of the passive funds didn’t see the coronavirus recession coming, but a lot of hedge funds did. Even we published an article near the end of February and predicted a US recession. Think about all the losses you could have avoided if you sold your shares in February and bought them back at the end of March. In this article we are going to take a closer look at hedge fund sentiment surrounding Innoviva, Inc. (NASDAQ:INVA).
Is Innoviva, Inc. (NASDAQ:INVA) a worthy investment today? Prominent investors are in a bearish mood. The number of bullish hedge fund positions dropped by 6 lately. Our calculations also showed that INVA isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
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 72.9% since March 2017 and outperformed the S&P 500 ETFs by more than 41 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.
Alex Denner of Sarissa Capital Management
We leave no stone unturned when looking for the next great investment idea. For example, this investor can predict short term winners following earnings announcements with 77% accuracy, so we check out his stock picks. A former hedge fund manager is pitching the “next Amazon” in this video; again we are listening. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind we’re going to analyze the fresh hedge fund action regarding Innoviva, Inc. (NASDAQ:INVA).
How have hedgies been trading Innoviva, Inc. (NASDAQ:INVA)?
At the end of the fourth quarter, a total of 19 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -24% from the previous quarter. On the other hand, there were a total of 22 hedge funds with a bullish position in INVA a year ago. With hedge funds’ positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were adding to their stakes considerably (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Renaissance Technologies has the biggest position in Innoviva, Inc. (NASDAQ:INVA), worth close to $111.8 million, corresponding to 0.1% of its total 13F portfolio. Sitting at the No. 2 spot is Sarissa Capital Management, led by Alex Denner, holding a $88.4 million position; the fund has 7.3% of its 13F portfolio invested in the stock. Other hedge funds and institutional investors that hold long positions contain D. E. Shaw’s D E Shaw, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital and Noam Gottesman’s GLG Partners. In terms of the portfolio weights assigned to each position Sarissa Capital Management allocated the biggest weight to Innoviva, Inc. (NASDAQ:INVA), around 7.34% of its 13F portfolio. Antara Capital is also relatively very bullish on the stock, designating 2.98 percent of its 13F equity portfolio to INVA.
Seeing as Innoviva, Inc. (NASDAQ:INVA) has experienced bearish sentiment from the entirety of the hedge funds we track, it’s safe to say that there lies a certain “tier” of fund managers who sold off their entire stakes last quarter. Intriguingly, Israel Englander’s Millennium Management dropped the biggest investment of all the hedgies tracked by Insider Monkey, totaling an estimated $4.5 million in stock. Himanshu Gulati’s fund, Antara Capital, also dropped its stock, about $4 million worth. These transactions are interesting, as total hedge fund interest dropped by 6 funds last quarter.
Let’s now take a look at hedge fund activity in other stocks similar to Innoviva, Inc. (NASDAQ:INVA). We will take a look at TPG Specialty Lending Inc (NYSE:TSLX), First Commonwealth Financial (NYSE:FCF), Boise Cascade Co (NYSE:BCC), and Tennant Company (NYSE:TNC). This group of stocks’ market valuations resemble INVA’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| TSLX | 10 | 64908 | 0 |
| FCF | 15 | 33470 | 3 |
| BCC | 24 | 77986 | 9 |
| TNC | 11 | 109526 | 0 |
| Average | 15 | 71473 | 3 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 15 hedge funds with bullish positions and the average amount invested in these stocks was $71 million. That figure was $303 million in INVA’s case. Boise Cascade Co (NYSE:BCC) is the most popular stock in this table. On the other hand TPG Specialty Lending Inc (NYSE:TSLX) is the least popular one with only 10 bullish hedge fund positions. Innoviva, Inc. (NASDAQ:INVA) is not the most popular stock in this group but hedge fund interest is still above average. 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 gained 1.0% in 2020 through May 1st but still beat the market by 12.9 percentage points. Hedge funds were also right about betting on INVA, though not to the same extent, as the stock returned -5% during the first four months of 2020 (through May 1st) and outperformed the market as well.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
