With the first-quarter round of 13F filings behind us it is time to take a look at the stocks in which some of the best money managers in the world preferred to invest or sell heading into the second quarter. One of these stocks was AcelRx Pharmaceuticals Inc (NASDAQ:ACRX).
Is AcelRx Pharmaceuticals Inc (NASDAQ:ACRX) a splendid investment today? Money managers are in a bearish mood. The number of bullish hedge fund bets fell by 1 recently. Our calculations also showed that ACRX isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. Our research has shown that hedge funds' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.8% through November 21, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
[caption id="attachment_365194" align="aligncenter" width="450"] David E. Shaw of D.E. Shaw[/caption]
We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, "I'm investing more today than I did back in early 2009." So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius' weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager's investor letter and the stock already gained 20 percent. Keeping this in mind we're going to analyze the latest hedge fund action regarding AcelRx Pharmaceuticals Inc (NASDAQ:ACRX).
How have hedgies been trading AcelRx Pharmaceuticals Inc (NASDAQ:ACRX)?
At the end of the third quarter, a total of 5 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -17% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards ACRX over the last 17 quarters. With hedgies' capital changing hands, there exists an "upper tier" of noteworthy hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).
More specifically, D E Shaw was the largest shareholder of AcelRx Pharmaceuticals Inc (NASDAQ:ACRX), with a stake worth $1.9 million reported as of the end of September. Trailing D E Shaw was Millennium Management, which amassed a stake valued at $0.4 million. Sculptor Capital, Citadel Investment Group, and HighVista Strategies were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position HighVista Strategies allocated the biggest weight to AcelRx Pharmaceuticals Inc (NASDAQ:ACRX), around 0.03% of its 13F portfolio. D E Shaw is also relatively very bullish on the stock, earmarking 0.0024 percent of its 13F equity portfolio to ACRX.
Due to the fact that AcelRx Pharmaceuticals Inc (NASDAQ:ACRX) has faced falling interest from the smart money, we can see that there exists a select few funds who sold off their positions entirely heading into Q4. Interestingly, Jerome Pfund and Michael Sjostrom's Sectoral Asset Management sold off the largest position of the "upper crust" of funds followed by Insider Monkey, comprising about $0.2 million in stock, and David Harding's Winton Capital Management was right behind this move, as the fund sold off about $0 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest was cut by 1 funds heading into Q4.
Let's go over hedge fund activity in other stocks similar to AcelRx Pharmaceuticals Inc (NASDAQ:ACRX). We will take a look at Hi-Crush Inc. (NYSE:HCR), Ohio Valley Banc Corp. (NASDAQ:OVBC), MainStreet Bancshares, Inc. (NASDAQ:MNSB), and Silvercrest Asset Management Group Inc (NASDAQ:SAMG). All of these stocks' market caps resemble ACRX's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position HCR,3,2694,0 OVBC,1,1839,0 MNSB,2,12983,-1 SAMG,4,12825,1 Average,2.5,7585,0 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 2.5 hedge funds with bullish positions and the average amount invested in these stocks was $8 million. That figure was $3 million in ACRX's case. Silvercrest Asset Management Group Inc (NASDAQ:SAMG) is the most popular stock in this table. On the other hand Ohio Valley Banc Corp. (NASDAQ:OVBC) is the least popular one with only 1 bullish hedge fund positions. Compared to these stocks AcelRx Pharmaceuticals Inc (NASDAQ:ACRX) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately ACRX wasn't nearly as popular as these 20 stocks and hedge funds that were betting on ACRX were disappointed as the stock returned -15.5% during the first two months of the fourth quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 70 percent of these stocks already outperformed the market in Q4.
Disclosure: None. This article was originally published at Insider Monkey.