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Were Hedge Funds Right About Eiger BioPharmaceuticals, Inc. (EIGR)?

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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 Eiger BioPharmaceuticals, Inc. (NASDAQ:EIGR).

Eiger BioPharmaceuticals, Inc. (NASDAQ:EIGR) shares haven't seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 17 hedge funds' portfolios at the end of the first quarter of 2021. Our calculations also showed that EIGR isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings). The level and the change in hedge fund popularity aren't the only variables you need to analyze to decipher hedge funds' perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That's why at the end of this article we will examine companies such as Navios Maritime Containers L.P. (NASDAQ:NMCI), Xeris Pharmaceuticals, Inc. (NASDAQ:XERS), and AudioEye, Inc. (NASDAQ:AEYE) to gather more data points.

In the eyes of most traders, hedge funds are assumed to be worthless, outdated financial tools of the past. While there are over 8000 funds trading at present, Our researchers choose to focus on the aristocrats of this group, about 850 funds. These hedge fund managers command the lion's share of the smart money's total capital, and by tracking their best stock picks, Insider Monkey has come up with various investment strategies that have historically outperformed the market. Insider Monkey's flagship short hedge fund strategy outrun the S&P 500 short ETFs by around 20 percentage points a year since its inception in March 2017. Also, our monthly newsletter's portfolio of long stock picks returned 206.8% since March 2017 (through May 2021) and beat the S&P 500 Index by more than 115 percentage points. You can download a sample issue of this newsletter on our website .

Ken Griffin CITADEL INVESTMENT GROUP
Ken Griffin CITADEL INVESTMENT GROUP

Ken Griffin of Citadel Investment Group

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, pet market is growing at a 7% annual rate and is expected to reach $110 billion in 2021. So, we are checking out the 5 best stocks for animal lovers. We go through lists like the 15 best Jim Cramer stocks to identify the next Tesla that will deliver outsized returns. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Keeping this in mind let's analyze the latest hedge fund action regarding Eiger BioPharmaceuticals, Inc. (NASDAQ:EIGR).

Do Hedge Funds Think EIGR Is A Good Stock To Buy Now?

At first quarter's end, a total of 17 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards EIGR over the last 23 quarters. So, let's review 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, 683 Capital Partners, managed by Ari Zweiman, holds the most valuable position in Eiger BioPharmaceuticals, Inc. (NASDAQ:EIGR). 683 Capital Partners has a $23.8 million position in the stock, comprising 1.3% of its 13F portfolio. Coming in second is Vivo Capital, led by Albert Cha and Frank Kung, holding a $15.9 million position; 0.6% of its 13F portfolio is allocated to the stock. Some other members of the smart money that are bullish comprise Ken Griffin's Citadel Investment Group, Bihua Chen's Cormorant Asset Management and Peter A. Wright's P.A.W. CAPITAL PARTNERS. In terms of the portfolio weights assigned to each position P.A.W. CAPITAL PARTNERS allocated the biggest weight to Eiger BioPharmaceuticals, Inc. (NASDAQ:EIGR), around 2.96% of its 13F portfolio. 683 Capital Partners is also relatively very bullish on the stock, setting aside 1.26 percent of its 13F equity portfolio to EIGR.

Seeing as Eiger BioPharmaceuticals, Inc. (NASDAQ:EIGR) has witnessed declining sentiment from the entirety of the hedge funds we track, we can see that there exists a select few fund managers who sold off their full holdings in the first quarter. Interestingly, Fred Knoll's Knoll Capital Management said goodbye to the biggest position of all the hedgies monitored by Insider Monkey, valued at close to $8.5 million in stock. D. E. Shaw's fund, D E Shaw, also dumped its stock, about $0.3 million worth. These moves are important to note, as total hedge fund interest stayed the same (this is a bearish signal in our experience).

Let's also examine hedge fund activity in other stocks similar to Eiger BioPharmaceuticals, Inc. (NASDAQ:EIGR). These stocks are Navios Maritime Containers L.P. (NASDAQ:NMCI), Xeris Pharmaceuticals, Inc. (NASDAQ:XERS), AudioEye, Inc. (NASDAQ:AEYE), Theratechnologies Inc. (NASDAQ:THTX), uCloudlink Group Inc. (NASDAQ:UCL), PowerFleet, Inc. (NASDAQ:PWFL), and eGain Corporation (NASDAQ:EGAN). This group of stocks' market values are closest to EIGR's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position NMCI,3,23247,-1 XERS,11,65125,4 AEYE,5,28137,-1 THTX,6,43493,1 UCL,1,301,1 PWFL,15,71698,4 EGAN,8,16475,-7 Average,7,35497,0.1 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 7 hedge funds with bullish positions and the average amount invested in these stocks was $35 million. That figure was $69 million in EIGR's case. PowerFleet, Inc. (NASDAQ:PWFL) is the most popular stock in this table. On the other hand uCloudlink Group Inc. (NASDAQ:UCL) is the least popular one with only 1 bullish hedge fund positions. Compared to these stocks Eiger BioPharmaceuticals, Inc. (NASDAQ:EIGR) is more popular among hedge funds. Our overall hedge fund sentiment score for EIGR is 73.9. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 28.5% in 2021 through July 23rd and still beat the market by 10.1 percentage points. Unfortunately EIGR wasn't nearly as popular as these 5 stocks and hedge funds that were betting on EIGR were disappointed as the stock returned -8.2% since the end of the first quarter (through 7/23) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market since 2019.

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Disclosure: None. This article was originally published at Insider Monkey.