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Hedge Funds Are Dumping OptimizeRx Corporation (OPRX)

Asma UL Husna

In this article you are going to find out whether hedge funds think OptimizeRx Corporation (NASDAQ:OPRX) 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.

OptimizeRx Corporation (NASDAQ:OPRX) was in 4 hedge funds' portfolios at the end of March. OPRX investors should pay attention to a decrease in hedge fund sentiment lately. There were 6 hedge funds in our database with OPRX holdings at the end of the previous quarter. Our calculations also showed that OPRX 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 51 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_746893" align="aligncenter" width="399"] Paul Marshall of Marshall Wace[/caption]

Paul Marshall Marshall Wace

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020's unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out stocks recommended/dissed by legendary Bill Miller. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now let's take a peek at the new hedge fund action encompassing OptimizeRx Corporation (NASDAQ:OPRX).

Hedge fund activity in OptimizeRx Corporation (NASDAQ:OPRX)

Heading into the second quarter of 2020, a total of 4 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -33% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards OPRX over the last 18 quarters. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Of the funds tracked by Insider Monkey, G2 Investment Partners Management, managed by Josh Goldberg, holds the largest position in OptimizeRx Corporation (NASDAQ:OPRX). G2 Investment Partners Management has a $7.4 million position in the stock, comprising 2.5% of its 13F portfolio. On G2 Investment Partners Management's heels is Park West Asset Management, managed by Peter S. Park, which holds a $6.2 million position; 0.4% of its 13F portfolio is allocated to the company. Some other hedge funds and institutional investors that are bullish comprise Peter A. Wright's P.A.W. CAPITAL PARTNERS, Paul Marshall and Ian Wace's Marshall Wace LLP and . In terms of the portfolio weights assigned to each position P.A.W. CAPITAL PARTNERS allocated the biggest weight to OptimizeRx Corporation (NASDAQ:OPRX), around 3.66% of its 13F portfolio. G2 Investment Partners Management is also relatively very bullish on the stock, designating 2.46 percent of its 13F equity portfolio to OPRX.

Due to the fact that OptimizeRx Corporation (NASDAQ:OPRX) has faced bearish sentiment from the aggregate hedge fund industry, we can see that there is a sect of funds who sold off their entire stakes in the third quarter. Intriguingly, Brandon Osten's Venator Capital Management dropped the largest investment of the 750 funds watched by Insider Monkey, valued at about $1 million in stock, and Richard Driehaus's Driehaus Capital was right behind this move, as the fund said goodbye to about $0.2 million worth. These transactions are important to note, as total hedge fund interest fell by 2 funds in the third quarter.

Let's now review hedge fund activity in other stocks similar to OptimizeRx Corporation (NASDAQ:OPRX). We will take a look at Capital Product Partners L.P. (NASDAQ:CPLP), Paratek Pharmaceuticals Inc (NASDAQ:PRTK), Prudential Bancorp, Inc. (NASDAQ:PBIP), and Energy Fuels Inc (NYSE:UUUU). This group of stocks' market valuations resemble OPRX's market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CPLP,4,2212,1 PRTK,11,10949,-2 PBIP,4,25625,0 UUUU,5,1354,1 Average,6,10035,0 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 6 hedge funds with bullish positions and the average amount invested in these stocks was $10 million. That figure was $16 million in OPRX's case. Paratek Pharmaceuticals Inc (NASDAQ:PRTK) is the most popular stock in this table. On the other hand Capital Product Partners L.P. (NASDAQ:CPLP) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks OptimizeRx Corporation (NASDAQ:OPRX) is even less popular than CPLP. Hedge funds clearly dropped the ball on OPRX as the stock delivered strong returns, though hedge funds' consensus picks still generated respectable returns. 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 8.3% in 2020 through the end of May and still beat the market by 13.2 percentage points. A small number of hedge funds were also right about betting on OPRX as the stock returned 25.4% so far in the second quarter and outperformed the market by an even larger margin.

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

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