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Huge Gainers: Zogenix, Inc. (ZGNX), Tetralogic Pharmaceuticals Corp, WPCS International Incorporated (WPCS) and More

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The spotlight now turns to Zogenix, Inc. (NASDAQ:ZGNX), Tetralogic Tetralogic Pharmaceuticals Corp (NASDAQ:TLOG), WPCS International Incorporated (NASDAQ:WPCS) and Rock Creek Pharmaceuticals, Inc. (NASDAQ:RCPI) as the four stocks appear to have massive gains today, July 1.

In the case of Zogenix, Inc. (NASDAQ:ZGNX), however, the stock may appear to have made a colossal jump of over 700% from its closing price of $1.68 per share yesterday but this is because of a 1-for-8 reverse stock split. Factoring in the reverse split which was approved by the company’s Board of Directors on June 19 and is effective today, the stock only gained 2.5% from its price yesterday. From January 2 to June 30, the stock gained 22.63%. In the one-year period leading to June 30, the stock has lost 16.83% in value.

Tetralogic Tetralogic Pharmaceuticals Corp (NASDAQ:TLOG), on the other hand, went up as high as $3.60 per share, 53.85% from its $2.34 per share closing price yesterday, as the market reacts positively to the firm announcing that three out of nine patients who entered a Phase 2A study of birinapant, in combination with azacitidine, in the treatment of myelodysplastic syndromes, a certain group of cancers, have shown complete responses. The stock is still up over 37% as of time of writing.

WPCS International Incorporated (NASDAQ:WPCS) has traded as high as $2.90 per share, up 88.31% from its closing price of $1.54 yesterday, on the back of an announcement that it has been awarded $3.6 million in new contracts in the first two months of its fiscal year 2016. The stock is still up over 65% as of time of writing.

Meanwhile, Rock Creek Pharmaceuticals, Inc. (NASDAQ:RCPI) surged as high as $2.01 per share, up 32.24% from its closing price of $1.52 per share yesterday, after the firm revealed that in a human proof of principle study with anatabine citrate, its lead compound, a single oral dose of the compound was found to be able to significantly inhibit the activation of inflammatory proteins in the blood of human subjects. The stock is still up 13.82%.

Did hedge funds predict these massive moves today? In the case of Zogenix and Tetralogic Pharmaceuticals, it appears so. Both companies experienced a jump in interest by March 31 among the hedge funds tracked by Insider Monkey.

 Zogenix, Inc. (NASDAQ:ZGNX)

Most investors can’t outperform the stock market by individually picking stocks because stock returns aren’t evenly distributed. A randomly picked stock has only a 35% to 45% chance (depending on the investment horizon) to outperform the market. There are a few exceptions, one of which is when it comes to purchases made by corporate insiders. Academic research has shown that certain insider purchases historically outperformed the market by an average of seven percentage points per year. This effect is more pronounced in small-cap stocks. Another exception is the small-cap stock picks of hedge funds. Our research has shown that the 15 most popular small-cap stocks among hedge funds outperformed the market by nearly a percentage point per month between 1999 and 2012. We have been forward testing the performance of these stock picks since the end of August 2012 and they have returned more than 135% over the ensuing 34 months, outperforming the S&P 500 Index by 80 percentage points (read the details here). The trick is focusing only on the best small-cap stock picks of funds, not their large-cap stock picks which are extensively covered by analysts and followed by almost everybody.

In terms of insider sentiment which Insider Monkey also uses to tell whether a stock is a good stock to buy at the moment, Tetralogic had two purchases in March by President and CEO Kevin Buchi and CFO Pete Meyers who bought 5,000 shares each. Zogenix Director Roger Hawley also bought 190,000 shares in total this year in transactions made in March 16 (140,000 shares) and June 16 (50,000 shares. Keeping this in mind, we’re going to view the fresh action regarding Zogenix, Inc. (NASDAQ:ZGNX) and Tetralogic Pharmaceuticals Corp (NASDAQ:TLOG).

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