It seems that the masses and most of the financial media hate hedge funds and what they do, but why is this hatred of hedge funds so prominent? At the end of the day, these asset management firms do not gamble the hard-earned money of the people who are on the edge of poverty. Truth be told, most hedge fund managers and other smaller players within this industry are very smart and skilled investors. Of course, they may also make wrong bets in some instances, but no one knows what the future holds and how market participants will react to the bountiful news that floods in each day. The Standard and Poor’s 500 Index returned approximately 20% in the first 9 months of this year (through September 30th). Conversely, hedge funds’ top 20 large-cap stock picks generated a return of 24% during the same 9-month period, with the majority of these stock picks outperforming the broader market benchmark. Coincidence? It might happen to be so, but it is unlikely. Our research covering the last 18 years indicates that hedge funds' consensus stock picks generate superior risk-adjusted returns. That's why we believe it isn't a waste of time to check out hedge fund sentiment before you invest in a stock like Minerva Neurosciences, Inc (NASDAQ:NERV).
Minerva Neurosciences, Inc (NASDAQ:NERV) investors should pay attention to a decrease in enthusiasm from smart money of late. Our calculations also showed that NERV 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.
At the moment there are dozens of methods investors can use to analyze stocks. A couple of the most useful methods are hedge fund and insider trading sentiment. Our experts have shown that, historically, those who follow the best picks of the best investment managers can trounce the broader indices by a superb margin (see the details here).
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. Now we're going to review the new hedge fund action regarding Minerva Neurosciences, Inc (NASDAQ:NERV).
Hedge fund activity in Minerva Neurosciences, Inc (NASDAQ:NERV)
Heading into the third quarter of 2019, a total of 9 of the hedge funds tracked by Insider Monkey were long this stock, a change of -18% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards NERV over the last 16 quarters. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, GMT Capital was the largest shareholder of Minerva Neurosciences, Inc (NASDAQ:NERV), with a stake worth $6.7 million reported as of the end of March. Trailing GMT Capital was Highland Capital Management, which amassed a stake valued at $4.9 million. Millennium Management, Renaissance Technologies, and Cormorant Asset Management were also very fond of the stock, giving the stock large weights in their portfolios.
Due to the fact that Minerva Neurosciences, Inc (NASDAQ:NERV) has experienced falling interest from the smart money, it's safe to say that there lies a certain "tier" of hedge funds that elected to cut their full holdings in the second quarter. At the top of the heap, Nathan Fischel's DAFNA Capital Management sold off the largest investment of all the hedgies followed by Insider Monkey, valued at an estimated $0.3 million in stock. Peter Algert and Kevin Coldiron's fund, Algert Coldiron Investors, also dumped its stock, about $0.1 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest dropped by 2 funds in the second quarter.
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Minerva Neurosciences, Inc (NASDAQ:NERV) but similarly valued. These stocks are Silicom Ltd. (NASDAQ:SILC), SeaSpine Holdings Corporation (NASDAQ:SPNE), Commercial Vehicle Group, Inc. (NASDAQ:CVGI), and eGain Corporation (NASDAQ:EGAN). This group of stocks' market valuations match NERV's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SILC,5,9207,-3 SPNE,7,15225,-1 CVGI,13,50541,-1 EGAN,12,30099,-2 Average,9.25,26268,-1.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 9.25 hedge funds with bullish positions and the average amount invested in these stocks was $26 million. That figure was $25 million in NERV's case. Commercial Vehicle Group, Inc. (NASDAQ:CVGI) is the most popular stock in this table. On the other hand Silicom Ltd. (NASDAQ:SILC) is the least popular one with only 5 bullish hedge fund positions. Minerva Neurosciences, Inc (NASDAQ:NERV) is not the least popular stock in this group but hedge fund interest is still below average. 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. A small number of hedge funds were also right about betting on NERV as the stock returned 37.7% during the same time frame and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.