In this article we will take a look at whether hedge funds think DURECT Corporation (NASDAQ:DRRX) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.
Is DURECT Corporation (NASDAQ:DRRX) a good investment right now? Prominent investors are in an optimistic mood. The number of bullish hedge fund bets improved by 2 lately. Our calculations also showed that DRRX isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks). Video: 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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 58 percentage points since March 2017 (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 36% through May 18th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
[caption id="attachment_736153" align="aligncenter" width="396"] Didric Cederholm of Lion Point Capital[/caption]
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, We take a look at lists like the 10 most profitable companies in the world to identify the compounders that are likely to deliver double digit returns. We interview hedge fund managers and ask them about their best ideas. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind we're going to take a look at the new hedge fund action encompassing DURECT Corporation (NASDAQ:DRRX).
How are hedge funds trading DURECT Corporation (NASDAQ:DRRX)?
Heading into the second quarter of 2020, a total of 9 of the hedge funds tracked by Insider Monkey were long this stock, a change of 29% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards DRRX over the last 18 quarters. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Lion Point held the most valuable stake in DURECT Corporation (NASDAQ:DRRX), which was worth $30.2 million at the end of the third quarter. On the second spot was Renaissance Technologies which amassed $8.1 million worth of shares. Millennium Management, Two Sigma Advisors, and ExodusPoint Capital 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 Lion Point allocated the biggest weight to DURECT Corporation (NASDAQ:DRRX), around 7.97% of its 13F portfolio. ExodusPoint Capital is also relatively very bullish on the stock, designating 0.06 percent of its 13F equity portfolio to DRRX.
Consequently, some big names have jumped into DURECT Corporation (NASDAQ:DRRX) headfirst. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, assembled the most valuable position in DURECT Corporation (NASDAQ:DRRX). Arrowstreet Capital had $0.4 million invested in the company at the end of the quarter. Qing Li's Sciencast Management also made a $0 million investment in the stock during the quarter.
Let's check out hedge fund activity in other stocks similar to DURECT Corporation (NASDAQ:DRRX). We will take a look at Autolus Therapeutics plc (NASDAQ:AUTL), Cellular Biomedicine Group, Inc. (NASDAQ:CBMG), The Rubicon Project Inc (NASDAQ:RUBI), and The Chefs Warehouse, Inc (NASDAQ:CHEF). This group of stocks' market values resemble DRRX's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position AUTL,13,22079,2 CBMG,3,14664,1 RUBI,22,49986,-2 CHEF,11,35478,4 Average,12.25,30552,1.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 12.25 hedge funds with bullish positions and the average amount invested in these stocks was $31 million. That figure was $49 million in DRRX's case. The Rubicon Project Inc (NASDAQ:RUBI) is the most popular stock in this table. On the other hand Cellular Biomedicine Group, Inc. (NASDAQ:CBMG) is the least popular one with only 3 bullish hedge fund positions. DURECT Corporation (NASDAQ:DRRX) is not the least popular stock in this group but hedge fund interest is still below 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 13.4% in 2020 through June 22nd and still beat the market by 15.9 percentage points. A small number of hedge funds were also right about betting on DRRX as the stock returned 56.1% during the second quarter and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.