We are still in an overall bull market and many stocks that smart money investors were piling into surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Hedge funds' top 3 stock picks returned 41.7% this year and beat the S&P 500 ETFs by 14 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That's why we believe it isn't a waste of time to check out hedge fund sentiment before you invest in a stock like Eagle Pharmaceuticals Inc (NASDAQ:EGRX).
Eagle Pharmaceuticals Inc (NASDAQ:EGRX) was in 16 hedge funds' portfolios at the end of the third quarter of 2019. EGRX has experienced a decrease in enthusiasm from smart money of late. There were 20 hedge funds in our database with EGRX holdings at the end of the previous quarter. Our calculations also showed that EGRX 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.
To most investors, hedge funds are perceived as slow, old financial vehicles of the past. While there are greater than 8000 funds in operation today, Our researchers look at the elite of this club, approximately 750 funds. These money managers orchestrate bulk of all hedge funds' total capital, and by monitoring their first-class stock picks, Insider Monkey has identified numerous investment strategies that have historically outperformed the broader indices. Insider Monkey's flagship short hedge fund strategy outstripped the S&P 500 short ETFs by around 20 percentage points per annum since its inception in May 2014. Our portfolio of short stocks lost 27.8% since February 2017 (through November 21st) even though the market was up more than 39% during the same period. We just shared a list of 7 short targets in our latest quarterly update .
[caption id="attachment_30621" align="alignnone" width="600"] Cliff Asness of AQR Capital Management[/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 look at the fresh hedge fund action surrounding Eagle Pharmaceuticals Inc (NASDAQ:EGRX).
Hedge fund activity in Eagle Pharmaceuticals Inc (NASDAQ:EGRX)
At Q3's end, a total of 16 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -20% from the previous quarter. The graph below displays the number of hedge funds with bullish position in EGRX over the last 17 quarters. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
When looking at the institutional investors followed by Insider Monkey, Park West Asset Management, managed by Peter S. Park, holds the largest position in Eagle Pharmaceuticals Inc (NASDAQ:EGRX). Park West Asset Management has a $61.8 million position in the stock, comprising 3% of its 13F portfolio. The second largest stake is held by Hudson Executive Capital, led by Douglas Braunstein and James Woolery, holding a $45.8 million position; 3.5% of its 13F portfolio is allocated to the stock. Some other professional money managers that hold long positions consist of Cliff Asness's AQR Capital Management, Noam Gottesman's GLG Partners and David E. Shaw's D E Shaw. In terms of the portfolio weights assigned to each position Hudson Executive Capital allocated the biggest weight to Eagle Pharmaceuticals Inc (NASDAQ:EGRX), around 3.47% of its 13F portfolio. Park West Asset Management is also relatively very bullish on the stock, dishing out 3.01 percent of its 13F equity portfolio to EGRX.
Judging by the fact that Eagle Pharmaceuticals Inc (NASDAQ:EGRX) has experienced bearish sentiment from hedge fund managers, it's safe to say that there is a sect of fund managers that decided to sell off their full holdings in the third quarter. At the top of the heap, Steve Cohen's Point72 Asset Management said goodbye to the biggest stake of the 750 funds watched by Insider Monkey, comprising an estimated $1.6 million in stock. John Overdeck and David Siegel's fund, Two Sigma Advisors, also dropped its stock, about $0.6 million worth. These moves are intriguing to say the least, as total hedge fund interest was cut by 4 funds in the third quarter.
Let's check out hedge fund activity in other stocks - not necessarily in the same industry as Eagle Pharmaceuticals Inc (NASDAQ:EGRX) but similarly valued. We will take a look at Partner Communications Company Ltd (NASDAQ:PTNR), WP Glimcher Inc (NYSE:WPG), ZIOPHARM Oncology Inc. (NASDAQ:ZIOP), and ScanSource, Inc. (NASDAQ:SCSC). This group of stocks' market valuations are closest to EGRX's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position PTNR,1,12616,-1 WPG,5,9261,-6 ZIOP,16,142289,4 SCSC,11,52810,3 Average,8.25,54244,0 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 8.25 hedge funds with bullish positions and the average amount invested in these stocks was $54 million. That figure was $147 million in EGRX's case. ZIOPHARM Oncology Inc. (NASDAQ:ZIOP) is the most popular stock in this table. On the other hand Partner Communications Company Ltd (NASDAQ:PTNR) is the least popular one with only 1 bullish hedge fund positions. Eagle Pharmaceuticals Inc (NASDAQ:EGRX) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but 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 EGRX wasn't nearly as popular as these 20 stocks and hedge funds that were betting on EGRX were disappointed as the stock returned 3.4% during the fourth quarter (through the end of November) 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 many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.