U.S. Markets close in 3 hrs 14 mins

Did Hedge Funds Drop The Ball On Akorn, Inc. (AKRX) ?

Nina Todic

Hedge funds are not perfect. They have their bad picks just like everyone else. Facebook, a stock hedge funds have loved dearly, lost nearly 40% of its value at one point in 2018. Although hedge funds are not perfect, their consensus picks do deliver solid returns, however. Our data show the top 20 S&P 500 stocks among hedge funds beat the S&P 500 Index by more than 6 percentage points so far in 2019. Because hedge funds have a lot of resources and their consensus picks do well, we pay attention to what they think. In this article, we analyze what the elite funds think of Akorn, Inc. (NASDAQ:AKRX).

Akorn, Inc. (NASDAQ:AKRX) has experienced an increase in activity from the world's largest hedge funds in recent months. Our calculations also showed that AKRX isn't among the 30 most popular stocks among hedge funds.

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 market by 40 percentage points since May 2014 through May 30, 2019 (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 30.9% through May 30, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

John Overdeck of Two Sigma

We're going to take a glance at the key hedge fund action regarding Akorn, Inc. (NASDAQ:AKRX).

Hedge fund activity in Akorn, Inc. (NASDAQ:AKRX)

Heading into the second quarter of 2019, a total of 16 of the hedge funds tracked by Insider Monkey were long this stock, a change of 7% from one quarter earlier. On the other hand, there were a total of 28 hedge funds with a bullish position in AKRX a year ago. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

No of Hedge Funds with AKRX Positions

Among these funds, Renaissance Technologies held the most valuable stake in Akorn, Inc. (NASDAQ:AKRX), which was worth $24.9 million at the end of the first quarter. On the second spot was AQR Capital Management which amassed $11.5 million worth of shares. Moreover, Two Sigma Advisors, Millennium Management, and D E Shaw were also bullish on Akorn, Inc. (NASDAQ:AKRX), allocating a large percentage of their portfolios to this stock.

As aggregate interest increased, some big names were breaking ground themselves. D E Shaw, managed by D. E. Shaw, initiated the biggest position in Akorn, Inc. (NASDAQ:AKRX). D E Shaw had $6.2 million invested in the company at the end of the quarter. Krishen Sud's Sivik Global Healthcare also initiated a $1.3 million position during the quarter. The other funds with new positions in the stock are Glenn Russell Dubin's Highbridge Capital Management, Michael Gelband's ExodusPoint Capital, and Alec Litowitz and Ross Laser's Magnetar Capital.

Let's go over hedge fund activity in other stocks similar to Akorn, Inc. (NASDAQ:AKRX). We will take a look at Yintech Investment Holdings Limited (NASDAQ:YIN), Trinity Merger Corp. (NASDAQ:TMCX), Secoo Holding Limited (NASDAQ:SECO), and SMART Global Holdings, Inc. (NASDAQ:SGH). This group of stocks' market valuations resemble AKRX's market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position YIN,2,494,0 TMCX,15,65966,1 SECO,8,18349,6 SGH,10,196404,-4 Average,8.75,70303,0.75 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 8.75 hedge funds with bullish positions and the average amount invested in these stocks was $70 million. That figure was $64 million in AKRX's case. Trinity Merger Corp. (NASDAQ:TMCX) is the most popular stock in this table. On the other hand Yintech Investment Holdings Limited (NASDAQ:YIN) is the least popular one with only 2 bullish hedge fund positions. Compared to these stocks Akorn, Inc. (NASDAQ:AKRX) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. Hedge funds were also right about betting on AKRX as the stock returned 32.1% during the same period 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.

Related Content