Is MediciNova, Inc. (NASDAQ:MNOV) a good equity to bet on right now? We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It's not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.
MediciNova, Inc. (NASDAQ:MNOV) has seen an increase in hedge fund sentiment of late. MNOV was in 4 hedge funds' portfolios at the end of the second quarter of 2019. There were 3 hedge funds in our database with MNOV holdings at the end of the previous quarter. Our calculations also showed that MNOV 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.
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 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 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.
Unlike other investors who track every movement of the 25 largest hedge funds, our long-short investment strategy relies on hedge fund buy/sell signals given by the 100 best performing hedge funds. Let's review the fresh hedge fund action surrounding MediciNova, Inc. (NASDAQ:MNOV).
How have hedgies been trading MediciNova, Inc. (NASDAQ:MNOV)?
At the end of the second quarter, a total of 4 of the hedge funds tracked by Insider Monkey were long this stock, a change of 33% from the first quarter of 2019. By comparison, 3 hedge funds held shares or bullish call options in MNOV a year ago. With hedgies' positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were boosting their holdings significantly (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, D E Shaw, managed by D. E. Shaw, holds the number one position in MediciNova, Inc. (NASDAQ:MNOV). D E Shaw has a $3.8 million position in the stock, comprising less than 0.1%% of its 13F portfolio. The second largest stake is held by Millennium Management, managed by Israel Englander, which holds a $1.1 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Some other members of the smart money that hold long positions encompass Charles Davidson and Joseph Jacobs's Wexford Capital, Ken Griffin's Citadel Investment Group and .
Now, some big names have been driving this bullishness. Millennium Management, managed by Israel Englander, established the largest position in MediciNova, Inc. (NASDAQ:MNOV). Millennium Management had $1.1 million invested in the company at the end of the quarter. Ken Griffin's Citadel Investment Group also made a $0.4 million investment in the stock during the quarter.
Let's check out hedge fund activity in other stocks similar to MediciNova, Inc. (NASDAQ:MNOV). These stocks are Digital Turbine Inc (NASDAQ:APPS), Sprague Resources LP (NYSE:SRLP), American Software, Inc. (NASDAQ:AMSWA), and American National BankShares Inc (NASDAQ:AMNB). This group of stocks' market caps resemble MNOV's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position APPS,11,17829,-4 SRLP,2,647,0 AMSWA,6,45127,-5 AMNB,2,9707,0 Average,5.25,18328,-2.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 5.25 hedge funds with bullish positions and the average amount invested in these stocks was $18 million. That figure was $6 million in MNOV's case. Digital Turbine Inc (NASDAQ:APPS) is the most popular stock in this table. On the other hand Sprague Resources LP (NYSE:SRLP) is the least popular one with only 2 bullish hedge fund positions. MediciNova, Inc. (NASDAQ:MNOV) 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 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately MNOV wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); MNOV investors were disappointed as the stock returned -17.3% 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.