How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don't always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding OptiNose, Inc. (NASDAQ:OPTN).
OptiNose, Inc. (NASDAQ:OPTN) was in 6 hedge funds' portfolios at the end of the second quarter of 2019. OPTN investors should pay attention to an increase in support from the world's most elite money managers lately. There were 3 hedge funds in our database with OPTN holdings at the end of the previous quarter. Our calculations also showed that OPTN isn't among the 30 most popular stocks among hedge funds (see the video below). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? 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 25.7% through September 30, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
In addition to following the biggest hedge funds for investment ideas, we also share stock pitches from conferences, investor letters and other sources like this one where the fund manager is talking about two under the radar 1000% return potential stocks: first one in internet infrastructure and the second in the heart of advertising market. We use hedge fund buy/sell signals to determine whether to conduct in-depth analysis of these stock ideas which take days. We're going to take a glance at the fresh hedge fund action encompassing OptiNose, Inc. (NASDAQ:OPTN).
How are hedge funds trading OptiNose, Inc. (NASDAQ:OPTN)?
Heading into the third quarter of 2019, a total of 6 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 100% from one quarter earlier. By comparison, 6 hedge funds held shares or bullish call options in OPTN a year ago. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Broadfin Capital, managed by Kevin Kotler, holds the biggest position in OptiNose, Inc. (NASDAQ:OPTN). Broadfin Capital has a $4.2 million position in the stock, comprising 0.9% of its 13F portfolio. Coming in second is GMT Capital, led by Thomas E. Claugus, holding a $1.5 million position; 0.1% of its 13F portfolio is allocated to the stock. Some other peers that are bullish encompass Kamran Moghtaderi's Eversept Partners, Ken Griffin's Citadel Investment Group and Israel Englander's Millennium Management.
As one would reasonably expect, key money managers have been driving this bullishness. GMT Capital, managed by Thomas E. Claugus, established the most valuable position in OptiNose, Inc. (NASDAQ:OPTN). GMT Capital had $1.5 million invested in the company at the end of the quarter. Kamran Moghtaderi's Eversept Partners also made a $0.7 million investment in the stock during the quarter. The only other fund with a new position in the stock is Israel Englander's Millennium Management.
Let's also examine hedge fund activity in other stocks similar to OptiNose, Inc. (NASDAQ:OPTN). These stocks are Titan International Inc (NYSE:TWI), American Midstream Partners LP (NYSE:AMID), Ardmore Shipping Corp (NYSE:ASC), and DASAN Zhone Solutions, Inc. (NASDAQ:DZSI). All of these stocks' market caps match OPTN's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position TWI,10,73341,-3 AMID,7,32088,-1 ASC,10,27291,1 DZSI,6,7836,4 Average,8.25,35139,0.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 8.25 hedge funds with bullish positions and the average amount invested in these stocks was $35 million. That figure was $7 million in OPTN's case. Titan International Inc (NYSE:TWI) is the most popular stock in this table. On the other hand DASAN Zhone Solutions, Inc. (NASDAQ:DZSI) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks OptiNose, Inc. (NASDAQ:OPTN) is even less popular than DZSI. Hedge funds dodged a bullet by taking a bearish stance towards OPTN. Our calculations showed that the top 20 most popular hedge fund stocks returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately OPTN wasn't nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); OPTN investors were disappointed as the stock returned -1.1% during the third quarter 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 many of these stocks already outperformed the market so far in 2019.
Disclosure: None. This article was originally published at Insider Monkey.