Based on the fact that hedge funds have collectively under-performed the market for several years, it would be easy to assume that their stock picks simply aren't very good. However, our research shows this not to be the case. In fact, when it comes to their very top picks collectively, they show a strong ability to pick winning stocks. This year hedge funds' top 20 stock picks easily bested the broader market, at 37.4% compared to 27.5%, despite there being a few duds in there like Berkshire Hathaway (even their collective wisdom isn't perfect). The results show that there is plenty of merit to imitating the collective wisdom of top investors.
ANI Pharmaceuticals Inc (NASDAQ:ANIP) investors should pay attention to an increase in support from the world's most elite money managers in recent months. ANIP was in 15 hedge funds' portfolios at the end of the third quarter of 2019. There were 12 hedge funds in our database with ANIP positions at the end of the previous quarter. Our calculations also showed that ANIP 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.
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 flagship best performing hedge funds strategy returned 91% since May 2014 and outperformed the Russell 2000 ETFs by nearly 40 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.
[caption id="attachment_364880" align="alignnone" width="823"] Nathaniel August of Mangrove Partners[/caption]
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world's largest cannabis market, so we check out this European marijuana stock pitch. 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 also rely on the best performing hedge funds' buy/sell signals. Let's take a peek at the fresh hedge fund action regarding ANI Pharmaceuticals Inc (NASDAQ:ANIP).
How have hedgies been trading ANI Pharmaceuticals Inc (NASDAQ:ANIP)?
At the end of the third quarter, a total of 15 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 25% from the previous quarter. The graph below displays the number of hedge funds with bullish position in ANIP over the last 17 quarters. With the smart money's positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were adding to their stakes substantially (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Nathaniel August's Mangrove Partners has the most valuable position in ANI Pharmaceuticals Inc (NASDAQ:ANIP), worth close to $37.2 million, comprising 4.5% of its total 13F portfolio. The second most bullish fund manager is Renaissance Technologies, which holds a $24.3 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Some other professional money managers that hold long positions contain David Brown's Hawk Ridge Management, Mitchell Blutt's Consonance Capital Management and Noam Gottesman's GLG Partners. In terms of the portfolio weights assigned to each position Mangrove Partners allocated the biggest weight to ANI Pharmaceuticals Inc (NASDAQ:ANIP), around 4.5% of its 13F portfolio. Hawk Ridge Management is also relatively very bullish on the stock, earmarking 2.26 percent of its 13F equity portfolio to ANIP.
As aggregate interest increased, key money managers have jumped into ANI Pharmaceuticals Inc (NASDAQ:ANIP) headfirst. GLG Partners, managed by Noam Gottesman, established the most valuable position in ANI Pharmaceuticals Inc (NASDAQ:ANIP). GLG Partners had $6.2 million invested in the company at the end of the quarter. Parvinder Thiara's Athanor Capital also initiated a $1.3 million position during the quarter. The following funds were also among the new ANIP investors: Paul Tudor Jones's Tudor Investment Corp, Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital, and David E. Shaw's D E Shaw.
Let's go over hedge fund activity in other stocks similar to ANI Pharmaceuticals Inc (NASDAQ:ANIP). These stocks are Twin River Worldwide Holdings Inc. (NYSE:TRWH), QEP Resources Inc (NYSE:QEP), Upland Software Inc (NASDAQ:UPLD), and TherapeuticsMD Inc (OTC:TXMD). All of these stocks' market caps are closest to ANIP's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position TRWH,14,207108,0 QEP,20,155279,2 UPLD,26,185976,2 TXMD,8,28322,0 Average,17,144171,1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 17 hedge funds with bullish positions and the average amount invested in these stocks was $144 million. That figure was $97 million in ANIP's case. Upland Software Inc (NASDAQ:UPLD) is the most popular stock in this table. On the other hand TherapeuticsMD Inc (OTC:TXMD) is the least popular one with only 8 bullish hedge fund positions. ANI Pharmaceuticals Inc (NASDAQ:ANIP) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we'd rather spend our time researching stocks that hedge funds are piling on. 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 ANIP wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); ANIP investors 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.