Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track nearly 750 active prominent money managers and analyze their quarterly 13F filings. The stocks that are heavily bought by hedge funds historically outperformed the market, though there is no shortage of high profile failures like hedge funds' recent losses in Facebook. Let’s take a closer look at what the funds we track think about Flexion Therapeutics Inc (NASDAQ:FLXN) in this article.
Flexion Therapeutics Inc (NASDAQ:FLXN) investors should pay attention to a decrease in support from the world's most elite money managers in recent months. Our calculations also showed that FLXN 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' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the market by 32 percentage points since May 2014 through March 12, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
Let's take a gander at the key hedge fund action surrounding Flexion Therapeutics Inc (NASDAQ:FLXN).
How have hedgies been trading Flexion Therapeutics Inc (NASDAQ:FLXN)?
At the end of the fourth quarter, a total of 14 of the hedge funds tracked by Insider Monkey were long this stock, a change of -7% from the second quarter of 2018. By comparison, 15 hedge funds held shares or bullish call options in FLXN a year ago. With hedge funds' sentiment swirling, there exists a select group of key hedge fund managers who were upping their stakes considerably (or already accumulated large positions).
More specifically, Point72 Asset Management was the largest shareholder of Flexion Therapeutics Inc (NASDAQ:FLXN), with a stake worth $13.5 million reported as of the end of December. Trailing Point72 Asset Management was Carlson Capital, which amassed a stake valued at $9.1 million. Rubric Capital Management, Kingdon Capital, and Armistice Capital were also very fond of the stock, giving the stock large weights in their portfolios.
Since Flexion Therapeutics Inc (NASDAQ:FLXN) has witnessed a decline in interest from the smart money, it's easy to see that there lies a certain "tier" of hedgies that slashed their positions entirely last quarter. Intriguingly, Philip Hempleman's Ardsley Partners said goodbye to the largest investment of all the hedgies watched by Insider Monkey, comprising close to $7.8 million in stock, and William Harnisch's Peconic Partners LLC was right behind this move, as the fund dumped about $4.2 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest dropped by 1 funds last quarter.
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Flexion Therapeutics Inc (NASDAQ:FLXN) but similarly valued. We will take a look at Antares Pharma Inc (NASDAQ:ATRS), Yintech Investment Holdings Limited (NASDAQ:YIN), Atlantic Capital Bancshares, Inc. (NASDAQ:ACBI), and P.H. Glatfelter Company (NYSE:GLT). This group of stocks' market caps resemble FLXN's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ATRS,10,46034,1 YIN,2,365,1 ACBI,14,81927,-3 GLT,6,13525,2 Average,8,35463,0.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 8 hedge funds with bullish positions and the average amount invested in these stocks was $35 million. That figure was $51 million in FLXN's case. Atlantic Capital Bancshares, Inc. (NASDAQ:ACBI) is the most popular stock in this table. On the other hand Yintech Investment Holdings Limited (NASDAQ:YIN) is the least popular one with only 2 bullish hedge fund positions. Flexion Therapeutics Inc (NASDAQ:FLXN) 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 FLXN wasn't nearly as popular as these 15 stock and hedge funds that were betting on FLXN were disappointed as the stock returned -9.6% 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.