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How DURECT Corporation (DRRX) Stacks Up Against Its Peers

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Legendary investors such as Leon Cooperman and Seth Klarman earn enormous amounts of money for themselves and their investors by doing in-depth research on small-cap stocks that big brokerage houses don’t publish. Small cap stocks -especially when they are screened well- can generate substantial outperformance versus a boring index fund. That’s why we analyze the activity of those successful funds in these small-cap stocks. In the following paragraphs, we analyze DURECT Corporation (NASDAQ:DRRX) from the perspective of those successful funds.

Is DURECT Corporation (NASDAQ:DRRX) a buy now? The smart money is unambiguously selling. The number of long hedge fund investments retreated by 4 recently. At the end of this article we will also compare DRRX to other stocks including Hallmark Financial Services, Inc. (NASDAQ:HALL), Deutsche Multi-Market Income Trust (NYSE:KMM), and Oppenheimer Holdings Inc. (USA) (NYSE:OPY) to get a better sense of its popularity.

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We follow over 700 hedge funds and other institutional investors and by analyzing their quarterly 13F filings, we identify stocks that they are collectively bullish on and develop investment strategies based on this data. One strategy that outperformed the market over the last year involves selecting the 100 best-performing funds and identifying the 30 mid-cap stocks that they are collectively most bullish on. Over the past year, this strategy generated returns of 18%, topping the 8% gain registered by S&P 500 ETFs. We launched this strategy 2.5 years ago and it returned more than 39% since then, vs. 22% gain registered by the S&P 500 ETFs.

Natallie Adams/Shutterstock.com

Natallie Adams/Shutterstock.com

How are hedge funds trading DURECT Corporation (NASDAQ:DRRX)?

Heading into the fourth quarter of 2016, a total of 6 of the hedge funds tracked by Insider Monkey were bullish on this stock, a 40% fall from one quarter earlier. By comparison, 12 hedge funds held shares or bullish call options in DRRX heading into this year, which has since retreated by 50%. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

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According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Kevin Kotler’s Broadfin Capital has the biggest position in DURECT Corporation (NASDAQ:DRRX), worth close to $8.9 million. On Broadfin Capital’s heels is Ari Zweiman of 683 Capital Partners, with a $4.2 million position. Other professional money managers with similar optimism include Millennium Management, one of the largest hedge funds in the world, and Hal Mintz’s Sabby Capital. We should note that 683 Capital Partners is among our list of the 100 best performing hedge funds, which is based on the performance of their 13F long positions in non-micro-cap stocks.

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