Investing in hedge funds can bring large profits, but it’s not for everybody, since hedge funds are available only for high-net-worth individuals. They generate significant returns for investors to justify their large fees and they allocate a lot of time and employ a complex analysis to determine the best stocks to invest in. A particularly interesting group of stocks that hedge funds like is the small-caps. The huge amount of capital does not allow hedge funds to invest a lot in small-caps, but our research showed that their most popular small-cap ideas are less efficiently priced and generate stronger returns than their large- and mega-cap picks and the broader market. That is why we follow the hedge fund activity in the small-cap space.
Pieris Pharmaceuticals, Inc. (NASDAQ:PIRS) has experienced an increase in support from the world's most elite money managers recently. Our calculations also showed that PIRS isn't among the 30 most popular stocks among hedge funds.
Why do we pay any attention at all to hedge fund sentiment? 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 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'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 24% through December 3, 2018. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Let's take a peek at the key hedge fund action regarding Pieris Pharmaceuticals, Inc. (NASDAQ:PIRS).
What have hedge funds been doing with Pieris Pharmaceuticals, Inc. (NASDAQ:PIRS)?
Heading into the fourth quarter of 2018, a total of 18 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 20% from the second quarter of 2018. By comparison, 11 hedge funds held shares or bullish call options in PIRS heading into this year. With hedgies' sentiment swirling, there exists a select group of noteworthy hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).
The largest stake in Pieris Pharmaceuticals, Inc. (NASDAQ:PIRS) was held by Biotechnology Value Fund / BVF Inc, which reported holding $31.4 million worth of stock at the end of September. It was followed by OrbiMed Advisors with a $13.8 million position. Other investors bullish on the company included Millennium Management, Prosight Capital, and Renaissance Technologies.
Now, some big names were leading the bulls' herd. Nantahala Capital Management, managed by Wilmot B. Harkey and Daniel Mack, assembled the biggest position in Pieris Pharmaceuticals, Inc. (NASDAQ:PIRS). Nantahala Capital Management had $3.6 million invested in the company at the end of the quarter. Peter A. Wright's P.A.W. CAPITAL PARTNERS also made a $1.4 million investment in the stock during the quarter. The only other fund with a brand new PIRS position is D. E. Shaw's D E Shaw.
Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Pieris Pharmaceuticals, Inc. (NASDAQ:PIRS) but similarly valued. These stocks are PIMCO Income Strategy Fund (NYSE:PFL), Hamilton Beach Brands Holding Company (NYSE:HBB), Twin Disc, Incorporated (NASDAQ:TWIN), and Lawson Products, Inc. (NASDAQ:LAWS). This group of stocks' market caps are similar to PIRS's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position PFL,1,2863,0 HBB,2,5065,-2 TWIN,10,49746,4 LAWS,5,11389,1 Average,4.5,17266,0.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 4.5 hedge funds with bullish positions and the average amount invested in these stocks was $17 million. That figure was $87 million in PIRS's case. Twin Disc, Incorporated (NASDAQ:TWIN) is the most popular stock in this table. On the other hand PIMCO Income Strategy Fund (NYSE:PFL) is the least popular one with only 1 bullish hedge fund positions. Compared to these stocks Pieris Pharmaceuticals, Inc. (NASDAQ:PIRS) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.
Disclosure: None. This article was originally published at Insider Monkey.