How do you pick the next stock to invest in? One way would be to spend hours 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 and going from there. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next stock pick. They don’t always get it right, but, on average, their stock picks historically generate strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding Depomed Inc (NASDAQ:DEPO).
Is Depomed Inc (NASDAQ:DEPO) going to take off soon? Hedge funds are getting more bullish. The number of long hedge fund positions moved up by ten in recent months.
In the eyes of most market participants, hedge funds are viewed as unimportant, outdated investment tools of the past. While there are more than 8,000 funds trading today, Insider Monkey looks at only the crème de la crème of this club, approximately 700 funds. It is estimated that this group of investors command the bulk of the smart money’s total asset base, and by tailing their top picks, Insider Monkey has come up with a number of investment strategies that have historically outpaced Mr. Market. Insider Monkey’s small-cap hedge fund strategy beat the S&P 500 index by 12 percentage points per year for a decade in its back tests.
With all of this in mind, we’re going to take a peek at the fresh action regarding Depomed Inc (NASDAQ:DEPO).
How are hedge funds trading Depomed Inc (NASDAQ:DEPO)?
At the end of the third quarter, a total of 32 of the hedge funds tracked by Insider Monkey held long positions in this stock, an increase of 45% from one quarter earlier. With hedge funds’ positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were increasing their holdings significantly.
According to hedge fund intelligence website Insider Monkey, Richard Mashaal’s Rima Senvest Management had the most valuable position in Depomed Inc (NASDAQ:DEPO), worth close to $51.9 million, comprising 3.7% of its total 13F portfolio. The second-most bullish hedge fund manager was TIG Advisors, led by Carl Tiedemann and Michael Tiedemann, holding a $48.5 million position; the fund had 2.2% of its 13F portfolio invested in the stock. Remaining peers that were bullish contained Thomas Steyer’s Farallon Capital, Matthew Mark’s Jet Capital Investors, and Curtis Schenker and Craig Effron’s Scoggin.
As industrywide interest jumped, some big names have jumped into Depomed Inc (NASDAQ:DEPO) headfirst. TIG Advisors initiated the most outsized position in Depomed Inc (NASDAQ:DEPO) through the aforementioned holding. Farallon Capital made a $30.3 million investment in the stock during the quarter. The following funds were also among the new DEPO investors: Jet Capital Investors, Scoggin, and Alec Litowitz and Ross Laser’s Magnetar Capital.
Let’s also take a look at hedge fund activity in other stocks similar to Depomed Inc (NASDAQ:DEPO). These stocks are MRC Global Inc (NYSE:MRC), AVG Technologies NV (NYSE:AVG), Acorda Therapeutics Inc (NASDAQ:ACOR), and CYS Investments Inc (NYSE:CYS). This group of stocks’ market caps are similar to DEPO’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
As you can see, Depomed is quite a bit more popular than its peers and investors are overweight the stock, holding 23.30% of its common shares. Coupled with soaring sentiment, Depomed is certainly a stock that smart money is high on at the moment, which could indicate near-term tailwinds.
With the returns exhibited by the aforementioned tactics, everyday investors must always monitor hedge fund sentiment, and Depomed Inc (NASDAQ:DEPO) applies perfectly to this mantra.