Is Liquidia Technologies, Inc. (NASDAQ:LQDA) a good bet right now? We like to analyze hedge fund sentiment before doing days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy League graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments and it is a fact that hedge funds' picks don't beat the market 100% of the time, but their consensus picks have historically done very well and have outperformed the market after adjusting for risk.
Liquidia Technologies, Inc. (NASDAQ:LQDA) investors should be aware of an increase in hedge fund sentiment in recent months. LQDA was in 11 hedge funds' portfolios at the end of March. There were 3 hedge funds in our database with LQDA positions at the end of the previous quarter. Our calculations also showed that LQDA isn't among the 30 most popular stocks among hedge funds.
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' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (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 30.9% through May 30, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
We're going to take a peek at the recent hedge fund action regarding Liquidia Technologies, Inc. (NASDAQ:LQDA).
Hedge fund activity in Liquidia Technologies, Inc. (NASDAQ:LQDA)
At the end of the first quarter, a total of 11 of the hedge funds tracked by Insider Monkey were long this stock, a change of 267% from the fourth quarter of 2018. By comparison, 0 hedge funds held shares or bullish call options in LQDA a year ago. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Millennium Management was the largest shareholder of Liquidia Technologies, Inc. (NASDAQ:LQDA), with a stake worth $7.8 million reported as of the end of March. Trailing Millennium Management was Samsara BioCapital, which amassed a stake valued at $7.3 million. Luminus Management, Endurant Capital Management, and Opaleye Management were also very fond of the stock, giving the stock large weights in their portfolios.
As one would reasonably expect, key hedge funds have been driving this bullishness. Luminus Management, managed by Jonathan Barrett and Paul Segal, created the most valuable position in Liquidia Technologies, Inc. (NASDAQ:LQDA). Luminus Management had $3.7 million invested in the company at the end of the quarter. James A. Silverman's Opaleye Management also initiated a $2.6 million position during the quarter. The other funds with new positions in the stock are Ken Griffin's Citadel Investment Group, Louis Bacon's Moore Global Investments, and Daniel S. Och's OZ Management.
Let's also examine hedge fund activity in other stocks similar to Liquidia Technologies, Inc. (NASDAQ:LQDA). These stocks are Global Water Resources, Inc. (NASDAQ:GWRS), Frontier Communications Corporation (NASDAQ:FTR), Abraxas Petroleum Corp. (NASDAQ:AXAS), and Avedro, Inc. (NASDAQ:AVDR). This group of stocks' market valuations are similar to LQDA's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position GWRS,6,9879,-1 FTR,18,20124,3 AXAS,12,26998,1 AVDR,13,65244,13 Average,12.25,30561,4 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 12.25 hedge funds with bullish positions and the average amount invested in these stocks was $31 million. That figure was $29 million in LQDA's case. Frontier Communications Corporation (NASDAQ:FTR) is the most popular stock in this table. On the other hand Global Water Resources, Inc. (NASDAQ:GWRS) is the least popular one with only 6 bullish hedge fund positions. Liquidia Technologies, Inc. (NASDAQ:LQDA) is not the least popular stock in this group but hedge fund interest is still below average. 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 20 most popular stocks among hedge funds returned 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. Unfortunately LQDA wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); LQDA investors were disappointed as the stock returned -22.9% during the same time period 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 13 of these stocks already outperformed the market so far in Q2.
Disclosure: None. This article was originally published at Insider Monkey.