While the market driven by short-term sentiment influenced by uncertainty regarding the future of the interest rate environment in the US, declining oil prices and the trade war with China, many smart money investors kept their optimism regarding the current bull run in the fourth quarter, while still hedging many of their long positions. However, as we know, big investors usually buy stocks with strong fundamentals, which is why we believe we can profit from imitating them. In this article, we are going to take a look at the smart money sentiment surrounding Akorn, Inc. (NASDAQ:AKRX).
Is Akorn, Inc. (NASDAQ:AKRX) the right pick for your portfolio? Hedge funds are getting less optimistic. The number of bullish hedge fund bets retreated by 24 in recent months. Our calculations also showed that AKRX isn't among the 30 most popular stocks among hedge funds.
In the eyes of most stock holders, hedge funds are seen as worthless, outdated financial vehicles of years past. While there are over 8000 funds trading at present, Our researchers choose to focus on the top tier of this club, approximately 750 funds. These investment experts control most of the hedge fund industry's total asset base, and by shadowing their finest equity investments, Insider Monkey has identified numerous investment strategies that have historically outrun the broader indices. Insider Monkey's flagship hedge fund strategy outstripped the S&P 500 index by nearly 5 percentage points a year since its inception in May 2014 through early November 2018. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 27.5% since February 2017 (through March 12th) even though the market was up nearly 25% during the same period. We just shared a list of 6 short targets in our latest quarterly update and they are already down an average of 6% in less than a month.
We're going to take a look at the key hedge fund action regarding Akorn, Inc. (NASDAQ:AKRX).
What does the smart money think about Akorn, Inc. (NASDAQ:AKRX)?
At the end of the fourth quarter, a total of 15 of the hedge funds tracked by Insider Monkey were long this stock, a change of -62% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards AKRX over the last 14 quarters. With hedge funds' sentiment swirling, there exists a select group of notable hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).
The largest stake in Akorn, Inc. (NASDAQ:AKRX) was held by Renaissance Technologies, which reported holding $14.5 million worth of stock at the end of December. It was followed by Paulson & Co with a $11.1 million position. Other investors bullish on the company included Point72 Asset Management, Millennium Management, and Marshall Wace LLP.
Because Akorn, Inc. (NASDAQ:AKRX) has experienced bearish sentiment from hedge fund managers, we can see that there was a specific group of fund managers who were dropping their positions entirely heading into Q3. At the top of the heap, Christopher Pucillo's Solus Alternative Asset Management said goodbye to the largest stake of all the hedgies tracked by Insider Monkey, valued at close to $54.8 million in stock. Michel Massoud's fund, Melqart Asset Management, also dropped its stock, about $27.6 million worth. These bearish behaviors are important to note, as total hedge fund interest fell by 24 funds heading into Q3.
Let's go over hedge fund activity in other stocks similar to Akorn, Inc. (NASDAQ:AKRX). We will take a look at Bonanza Creek Energy Inc (NYSE:BCEI), NVE Corporation (NASDAQ:NVEC), Ciner Resources LP (NYSE:CINR), and Fiesta Restaurant Group Inc (NASDAQ:FRGI). This group of stocks' market values resemble AKRX's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position BCEI,14,158600,-2 NVEC,4,13069,-2 CINR,2,6364,0 FRGI,20,115693,0 Average,10,73432,-1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 10 hedge funds with bullish positions and the average amount invested in these stocks was $73 million. That figure was $66 million in AKRX's case. Fiesta Restaurant Group Inc (NASDAQ:FRGI) is the most popular stock in this table. On the other hand Ciner Resources LP (NYSE:CINR) is the least popular one with only 2 bullish hedge fund positions. Akorn, Inc. (NASDAQ:AKRX) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Unfortunately AKRX wasn't nearly as popular as these 15 stock and hedge funds that were betting on AKRX were disappointed as the stock returned -11.8% and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 15 most popular stocks) among hedge funds as 13 of these stocks already outperformed the market this year.
Disclosure: None. This article was originally published at Insider Monkey.