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Hedge Fund Sentiment Is Stagnant On Pacira Biosciences Inc (PCRX)

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The 800+ hedge funds and famous money managers tracked by Insider Monkey have already compiled and submitted their 13F filings for the first quarter, which unveil their equity positions as of March 31st. We went through these filings, fixed typos and other more significant errors and identified the changes in hedge fund portfolios. Our extensive review of these public filings is finally over, so this article is set to reveal the smart money sentiment towards Pacira Biosciences Inc (NASDAQ:PCRX).

Hedge fund interest in Pacira Biosciences Inc (NASDAQ:PCRX) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that PCRX isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings). The level and the change in hedge fund popularity aren't the only variables you need to analyze to decipher hedge funds' perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That's why at the end of this article we will examine companies such as Antero Resources Corp (NYSE:AR), Acushnet Holdings Corp. (NYSE:GOLF), and Alamos Gold Inc (NYSE:AGI) to gather more data points.

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' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 115 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.

James Flynn Deerfield Management
James Flynn Deerfield Management

James E. Flynn of Deerfield Management

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, Chuck Schumer recently stated that marijuana legalization will be a Senate priority. So, we are checking out this under the radar stock that will benefit from this. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. With all of this in mind let's go over the new hedge fund action regarding Pacira Biosciences Inc (NASDAQ:PCRX).

Do Hedge Funds Think PCRX Is A Good Stock To Buy Now?

At Q1's end, a total of 20 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the previous quarter. By comparison, 26 hedge funds held shares or bullish call options in PCRX 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.

The largest stake in Pacira Biosciences Inc (NASDAQ:PCRX) was held by Renaissance Technologies, which reported holding $162.2 million worth of stock at the end of December. It was followed by Paulson & Co with a $99.1 million position. Other investors bullish on the company included Deerfield Management, Rock Springs Capital Management, and D E Shaw. In terms of the portfolio weights assigned to each position Tamarack Capital Management allocated the biggest weight to Pacira Biosciences Inc (NASDAQ:PCRX), around 7.91% of its 13F portfolio. Paulson & Co is also relatively very bullish on the stock, setting aside 2.28 percent of its 13F equity portfolio to PCRX.

Seeing as Pacira Biosciences Inc (NASDAQ:PCRX) has experienced bearish sentiment from the smart money, it's safe to say that there exists a select few money managers who were dropping their entire stakes last quarter. Intriguingly, James E. Flynn's Deerfield Management dumped the largest stake of the 750 funds tracked by Insider Monkey, worth close to $22.7 million in stock, and Noam Gottesman's GLG Partners was right behind this move, as the fund said goodbye to about $4.5 million worth. These transactions are important to note, as total hedge fund interest stayed the same (this is a bearish signal in our experience).

Let's check out hedge fund activity in other stocks similar to Pacira Biosciences Inc (NASDAQ:PCRX). These stocks are Antero Resources Corp (NYSE:AR), Acushnet Holdings Corp. (NYSE:GOLF), Alamos Gold Inc (NYSE:AGI), Cardlytics, Inc. (NASDAQ:CDLX), Corsair Gaming, Inc. (NASDAQ:CRSR), Clover Health Investments, Corp. (NASDAQ:CLOV), and Kulicke and Soffa Industries Inc. (NASDAQ:KLIC). This group of stocks' market caps are similar to PCRX's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position AR,33,609879,2 GOLF,19,40986,6 AGI,22,267948,5 CDLX,38,1012610,6 CRSR,9,22426,-3 CLOV,23,822813,23 KLIC,34,428667,-2 Average,25.4,457904,5.3 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 25.4 hedge funds with bullish positions and the average amount invested in these stocks was $458 million. That figure was $547 million in PCRX's case. Cardlytics, Inc. (NASDAQ:CDLX) is the most popular stock in this table. On the other hand Corsair Gaming, Inc. (NASDAQ:CRSR) is the least popular one with only 9 bullish hedge fund positions. Pacira Biosciences Inc (NASDAQ:PCRX) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for PCRX is 43.3. 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. This is a slightly negative signal and we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 23.8% in 2021 through July 16th and surpassed the market again by 7.7 percentage points. Unfortunately PCRX wasn't nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); PCRX investors were disappointed as the stock returned -21.1% since the end of March (through 7/16) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2021.

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Disclosure: None. This article was originally published at Insider Monkey.