Looking for stocks with high upside potential? Just follow the big players within the hedge fund industry. Why should you do so? Let’s take a brief look at what statistics have to say about hedge funds’ stock picking abilities to illustrate. The Standard and Poor’s 500 Index returned approximately 26% in 2019 (through November 22nd). Conversely, hedge funds’ 20 preferred S&P 500 stocks generated a return of nearly 35% during the same period, with the majority of these stock picks outperforming the broader market benchmark. Coincidence? It might happen to be so, but it is unlikely. Our research covering the last 18 years indicates that hedge funds' consensus stock picks generate superior risk-adjusted returns. That's why we believe it is wise to check hedge fund activity before you invest your time or your savings on a stock like Eiger BioPharmaceuticals, Inc. (NASDAQ:EIGR).
Eiger BioPharmaceuticals, Inc. (NASDAQ:EIGR) was in 24 hedge funds' portfolios at the end of the third quarter of 2019. EIGR has experienced an increase in enthusiasm from smart money in recent months. There were 21 hedge funds in our database with EIGR positions at the end of the previous quarter. Our calculations also showed that EIGR 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.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's flagship best performing hedge funds strategy returned 91% since May 2014 and outperformed the Russell 2000 ETFs by nearly 40 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
[caption id="attachment_261247" align="aligncenter" width="450"] Kevin Kotler of Broadfin Capital[/caption]
Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world's most bearish hedge fund that's more convinced than ever that a crash is coming, our long-short investment strategy doesn't rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds' buy/sell signals. We're going to take a glance at the latest hedge fund action encompassing Eiger BioPharmaceuticals, Inc. (NASDAQ:EIGR).
What have hedge funds been doing with Eiger BioPharmaceuticals, Inc. (NASDAQ:EIGR)?
At the end of the third quarter, a total of 24 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 14% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards EIGR over the last 17 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.
More specifically, Adage Capital Management was the largest shareholder of Eiger BioPharmaceuticals, Inc. (NASDAQ:EIGR), with a stake worth $22.8 million reported as of the end of September. Trailing Adage Capital Management was 683 Capital Partners, which amassed a stake valued at $19.1 million. Vivo Capital, Broadfin Capital, and Farallon 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 Knoll Capital Management allocated the biggest weight to Eiger BioPharmaceuticals, Inc. (NASDAQ:EIGR), around 3.29% of its 13F portfolio. Broadfin Capital is also relatively very bullish on the stock, designating 2.59 percent of its 13F equity portfolio to EIGR.
Now, key hedge funds have been driving this bullishness. Winton Capital Management, managed by David Harding, established the most outsized position in Eiger BioPharmaceuticals, Inc. (NASDAQ:EIGR). Winton Capital Management had $0.3 million invested in the company at the end of the quarter. David E. Shaw's D E Shaw also made a $0.1 million investment in the stock during the quarter. The only other fund with a new position in the stock is Paul Marshall and Ian Wace's Marshall Wace.
Let's now take a look at hedge fund activity in other stocks similar to Eiger BioPharmaceuticals, Inc. (NASDAQ:EIGR). These stocks are First Choice Bancorp (NASDAQ:FCBP), The Meet Group, Inc. (NASDAQ:MEET), Noodles & Co (NASDAQ:NDLS), and StarTek, Inc. (NYSE:SRT). This group of stocks' market valuations are similar to EIGR's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position FCBP,3,1334,2 MEET,10,49716,-2 NDLS,14,78633,2 SRT,4,6084,1 Average,7.75,33942,0.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 7.75 hedge funds with bullish positions and the average amount invested in these stocks was $34 million. That figure was $140 million in EIGR's case. Noodles & Co (NASDAQ:NDLS) is the most popular stock in this table. On the other hand First Choice Bancorp (NASDAQ:FCBP) is the least popular one with only 3 bullish hedge fund positions. Compared to these stocks Eiger BioPharmaceuticals, Inc. (NASDAQ:EIGR) is more popular among hedge funds. 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. Hedge funds were also right about betting on EIGR as the stock returned 28.3% during the first two months of Q4 and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
Disclosure: None. This article was originally published at Insider Monkey.