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In this article you are going to find out whether hedge funds think ESSA Pharma Inc. (NASDAQ:EPIX) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It's not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.
Is EPIX a good stock to buy now? ESSA Pharma Inc. (NASDAQ:EPIX) was in 16 hedge funds' portfolios at the end of September. The all time high for this statistic is 7. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. EPIX investors should be aware of an increase in hedge fund sentiment in recent months. There were 7 hedge funds in our database with EPIX positions at the end of the second quarter. Our calculations also showed that EPIX isn't among the 30 most popular stocks among hedge funds (click for Q3 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 66 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 13% through November 17th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Richard Driehaus of Driehaus Capital
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. With all of this in mind we're going to take a gander at the latest hedge fund action encompassing ESSA Pharma Inc. (NASDAQ:EPIX).
Do Hedge Funds Think EPIX Is A Good Stock To Buy Now?
At Q3's end, a total of 16 of the hedge funds tracked by Insider Monkey were long this stock, a change of 129% from the second quarter of 2020. By comparison, 3 hedge funds held shares or bullish call options in EPIX a year ago. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Biotechnology Value Fund / BVF Inc was the largest shareholder of ESSA Pharma Inc. (NASDAQ:EPIX), with a stake worth $20.7 million reported as of the end of September. Trailing Biotechnology Value Fund / BVF Inc was Soleus Capital, which amassed a stake valued at $12.6 million. Vivo Capital, OrbiMed Advisors, and Sio 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 Soleus Capital allocated the biggest weight to ESSA Pharma Inc. (NASDAQ:EPIX), around 6.68% of its 13F portfolio. Biotechnology Value Fund / BVF Inc is also relatively very bullish on the stock, setting aside 1.13 percent of its 13F equity portfolio to EPIX.
Consequently, key money managers were leading the bulls' herd. Vivo Capital, managed by Albert Cha and Frank Kung, assembled the most outsized position in ESSA Pharma Inc. (NASDAQ:EPIX). Vivo Capital had $10.5 million invested in the company at the end of the quarter. Michael Castor's Sio Capital also initiated a $4.5 million position during the quarter. The other funds with brand new EPIX positions are Ken Griffin's Citadel Investment Group, Richard Driehaus's Driehaus Capital, and Aaron Cowen's Suvretta Capital Management.
Let's now take a look at hedge fund activity in other stocks similar to ESSA Pharma Inc. (NASDAQ:EPIX). We will take a look at Verrica Pharmaceuticals Inc. (NASDAQ:VRCA), Soleno Therapeutics, Inc. (NASDAQ:SLNO), Hovnanian Enterprises, Inc. (NYSE:HOV), Medicenna Therapeutics Corp. (NASDAQ:MDNA), Norwood Financial Corp. (NASDAQ:NWFL), Protective Insurance Corporation (NASDAQ:PTVCA), and DBV Technologies SA (NASDAQ:DBVT). This group of stocks' market values are closest to EPIX's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position VRCA,4,41016,1 SLNO,13,45710,-2 HOV,8,27186,-1 MDNA,2,1975,2 NWFL,2,1813,0 PTVCA,2,2104,0 DBVT,5,39241,-3 Average,5.1,22721,-0.4 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 5.1 hedge funds with bullish positions and the average amount invested in these stocks was $23 million. That figure was $72 million in EPIX's case. Soleno Therapeutics, Inc. (NASDAQ:SLNO) is the most popular stock in this table. On the other hand Medicenna Therapeutics Corp. (NASDAQ:MDNA) is the least popular one with only 2 bullish hedge fund positions. Compared to these stocks ESSA Pharma Inc. (NASDAQ:EPIX) is more popular among hedge funds. Our overall hedge fund sentiment score for EPIX is 90. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 30.7% in 2020 through December 14th and still beat the market by 15.8 percentage points. Unfortunately EPIX wasn't nearly as popular as these 20 stocks and hedge funds that were betting on EPIX were disappointed as the stock returned 2.5% since the end of the third quarter (through 12/14) 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 most of these stocks already outperformed the market in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.