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Were Hedge Funds Right About Supernus Pharmaceuticals Inc (SUPN)?

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Reymerlyn Martin
·5 min read
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Hedge funds don't get the respect they used to get. Nowadays investors prefer passive funds over actively managed funds. One thing they don't realize is that 100% of the passive funds didn't see the coronavirus recession coming, but a lot of hedge funds did. Even we published an article near the end of February and predicted a US recession. Think about all the losses you could have avoided if you sold your shares in February and bought them back at the end of March. In this article we will take a look at whether Supernus Pharmaceuticals Inc (NASDAQ:SUPN) is a good investment right now.

Is Supernus Pharmaceuticals Inc (NASDAQ:SUPN) a bargain? Prominent investors are buying. The number of long hedge fund bets moved up by 2 in recent months. Our calculations also showed that SUPN isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings). SUPN was in 20 hedge funds' portfolios at the end of December. There were 18 hedge funds in our database with SUPN positions at the end of the previous quarter.

In the 21st century investor’s toolkit there are numerous methods stock traders have at their disposal to value publicly traded companies. A pair of the most innovative methods are hedge fund and insider trading activity. Our researchers have shown that, historically, those who follow the top picks of the best money managers can beat the broader indices by a superb margin (see the details here).

[caption id="attachment_256989" align="aligncenter" width="400"]

Dmitry Balyasny of Balyasny Asset Managemnet
Dmitry Balyasny of Balyasny Asset Managemnet

Dmitry Balyasny of Balyasny Asset Management[/caption]

We leave no stone unturned when looking for the next great investment idea. For example, this investor can predict short term winners following earnings announcements with 77% accuracy, so we check out his stock picks. A former hedge fund manager is pitching the "next Amazon" in this video; again we are listening. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind we're going to take a glance at the fresh hedge fund action surrounding Supernus Pharmaceuticals Inc (NASDAQ:SUPN).

Hedge fund activity in Supernus Pharmaceuticals Inc (NASDAQ:SUPN)

At Q4's end, a total of 20 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 11% from the previous quarter. By comparison, 15 hedge funds held shares or bullish call options in SUPN a year ago. With the smart money's sentiment swirling, there exists a select group of key hedge fund managers who were boosting their stakes significantly (or already accumulated large positions).

Among these funds, Armistice Capital held the most valuable stake in Supernus Pharmaceuticals Inc (NASDAQ:SUPN), which was worth $40.6 million at the end of the third quarter. On the second spot was Renaissance Technologies which amassed $21.8 million worth of shares. Millennium Management, Winton Capital Management, and Marshall Wace LLP were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Armistice Capital allocated the biggest weight to Supernus Pharmaceuticals Inc (NASDAQ:SUPN), around 2.34% of its 13F portfolio. Zebra Capital Management is also relatively very bullish on the stock, setting aside 0.53 percent of its 13F equity portfolio to SUPN.

As aggregate interest increased, some big names were breaking ground themselves. Armistice Capital, managed by Steven Boyd, assembled the biggest position in Supernus Pharmaceuticals Inc (NASDAQ:SUPN). Armistice Capital had $40.6 million invested in the company at the end of the quarter. Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital also made a $1.2 million investment in the stock during the quarter. The other funds with new positions in the stock are Minhua Zhang's Weld Capital Management, Dmitry Balyasny's Balyasny Asset Management, and Peter Muller's PDT Partners.

Let's check out hedge fund activity in other stocks similar to Supernus Pharmaceuticals Inc (NASDAQ:SUPN). We will take a look at Y-mAbs Therapeutics, Inc. (NASDAQ:YMAB), ShockWave Medical, Inc. (NASDAQ:SWAV), Hess Midstream Partners LP (NYSE:HESM), and Knoll Inc (NYSE:KNL). This group of stocks' market valuations resemble SUPN's market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position YMAB,12,119532,4 SWAV,15,104145,5 HESM,9,13068,1 KNL,19,63212,4 Average,13.75,74989,3.5 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 13.75 hedge funds with bullish positions and the average amount invested in these stocks was $75 million. That figure was $130 million in SUPN's case. Knoll Inc (NYSE:KNL) is the most popular stock in this table. On the other hand Hess Midstream Partners LP (NYSE:HESM) is the least popular one with only 9 bullish hedge fund positions. Compared to these stocks Supernus Pharmaceuticals Inc (NASDAQ:SUPN) is more popular among hedge funds. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 1.3% in 2020 through May 1st but still managed to beat the market by 12.9 percentage points. Hedge funds were also right about betting on SUPN, though not to the same extent, as the stock returned -2.1% in 2020 (through May 1st) and outperformed the market as well.

5 Most Popular Stocks Among Hedge Funds
5 Most Popular Stocks Among Hedge Funds

Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

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

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