Most securities that cost less than a dinner at a fast-food restaurant are considered to be too risky, with most intra-day traders or other investors usually avoiding these low-priced stocks. While securities with price tags below $5 may be riskier, retail investors fearing these lower-priced stocks should keep in mind that Apple Inc. (NASDAQ:AAPL), Ford Motor Company (NYSE:F) and other companies once traded below the $5 price level as well. It is also true that most stocks that trade below $5 have little analyst coverage, which may enable the hedge fund industry to identify high-potential investment opportunities by leveraging their highly-skilled research teams. That’s why Insider Monkey decided to compile a list of the five most popular healthcare stocks under $5 within the hedge fund industry. Hedge fund sentiment may point to healthcare stocks that look poised to possibly trade higher from current price levels in the future, though one should not forget the risk associated with such securities.
Through extensive research, we determined that imitating some of the picks of hedge funds and other institutional investors can help generate market-beating returns over the long run. The key is to focus on the small-cap picks of these investors, since they are usually less followed by the broader market and are less price-efficient. Our backtests that covered the period between 1999 and 2012, showed that following the 15 most popular small-caps among hedge funds can help a retail investor beat the market by an average of 95 basis points per month (see more details here).
#5. QLT Inc. (USA) (NASDAQ:QLTI)
– Investors with long positions (as of March 31): 17
– Aggregate value of investors’ holdings (as of March 31): $39.78 Million
There were 17 hedge funds tracked by Insider Monkey with long positions in QLT Inc. (USA) (NASDAQ:QLTI) at the end of the first quarter, compared with 19 funds registered at the end of 2015. Similarly, the overall value of those positions shrank to $39.78 million from $56.88 million quarter-over-quarter. It should be noted that the 17 money managers had accumulated nearly 38% of QLT’s outstanding common stock as of March 31. The biotechnology company focused on developing innovative ocular products has seen its shares drop by 43% since the beginning of 2016. QLT does not generate revenue from product sales just yet, with its core operations currently focused on clinical development programs related to the company’s synthetic retinoid for the treatment of certain age-related and inherited retinal diseases. QLT’s research and development expenditures for the first quarter were $3.0 million, up from $2.2 million recorded a year earlier. Kevin Kotler’s Broadfin Capital owns 4.45 million shares of QLT Inc. (USA) (NASDAQ:QLTI) as of the end of the first quarter.
#4. Rigel Pharmaceuticals Inc. (NASDAQ:RIGL)
– Investors with long positions (as of March 31): 18
– Aggregate value of investors’ holdings (as of March 31): $45.46 Million
The number of asset managers followed by Insider Monkey with stakes in Rigel Pharmaceuticals Inc. (NASDAQ:RIGL) remained unchanged during the first three months of 2016 at 18. In the meantime, the dollar value those stakes declined to $45.46 million from $59.97 million during the quarter, with roughly 24% of the company’s outstanding shares being stockpiled by the 18 hedge fund vehicles from our extensive database. The clinical-stage biotechnology company that focuses on discovering drugs in the therapeutic areas of immunology, oncology and immuno-oncology has seen its market value decline by 17% thus far in 2016. The company’s ongoing clinical programs comprise fostamatinib, which is being studied in a Phase 3 clinical trial for immune thrombocytopenic purpura, a Phase 2 clinical trial for autoimmune hemolytic anemia, as well as a Phase 2 clinical trial for IgA nephropathy. James E. Flynn’s Deerfield Management had 2.40 million shares of Rigel Pharmaceuticals Inc. (NASDAQ:RIGL) in its equity portfolio at the end of March.
The top three cheap healthcare stocks favored by top hedge funds are uncovered on the next page.