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Neos Therapeutics Inc (NEOS): Are Hedge Funds Right About This Stock?

Is Neos Therapeutics Inc (NASDAQ:NEOS) a good place to invest some of your money right now? We can gain invaluable insight to help us answer that question by studying the investment trends of top investors, who employ world-class Ivy League graduates, who are given immense resources and industry contacts to put their financial expertise to work. The top picks of these firms have historically outperformed the market when we account for known risk factors, making them very valuable investment ideas.

Neos Therapeutics Inc (NASDAQ:NEOS) went public at the end of July and even though the stock has lost over 30% since the IPO, it managed to capture the attention of several smart money investors from our database. At the end of this article we will also compare NEOS to other stocks, including Potbelly Corp (NASDAQ:PBPB), Zogenix, Inc. (NASDAQ:ZGNX), and Comtech Telecomm. Corp. (NASDAQ:CMTL) to get a better sense of its popularity.

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If you’d ask most investors, hedge funds are seen as slow, old investment vehicles of yesteryear. While there are greater than 8000 funds in operation at the moment, Our researchers hone in on the aristocrats of this club, about 700 funds. These hedge fund managers direct most of the hedge fund industry’s total asset base, and by tracking their top investments, Insider Monkey has spotted many investment strategies that have historically exceeded the S&P 500 index. Insider Monkey’s small-cap hedge fund strategy surpassed the S&P 500 index by 12 percentage points a year for a decade in their back tests.

Keeping this in mind, we’re going to review the key action regarding Neos Therapeutics Inc (NASDAQ:NEOS).

How are hedge funds trading Neos Therapeutics Inc (NASDAQ:NEOS)?

Among the nine funds that initiated stakes in Neos Therapeutics following its IPO, healthcare-focused Sio Capital, managed by Michael Castor, initiated the largest stake, which is valued at $14 million position in the stock, comprising 9.6% of its 13F portfolio. Coming in second is Jason Karp’s Tourbillon Capital Partners, with a $12.9 million position; 0.3% of its 13F portfolio is allocated to the company. Some other members of the smart money with similar optimism consist of James E. Flynn’s Deerfield Management, Joseph Edelman’s Perceptive Advisors and Phill Gross and Robert Atchinson’s Adage Capital Management.

Let’s now take a look at hedge fund activity in other stocks similar to Neos Therapeutics Inc (NASDAQ:NEOS). These stocks are Potbelly Corp (NASDAQ:PBPB), Zogenix, Inc. (NASDAQ:ZGNX), Comtech Telecomm. Corp. (NASDAQ:CMTL), and BioTelemetry, Inc (NASDAQ:BEAT). This group of stocks’ market caps match NEOS’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
PBPB 15 34756 -4
ZGNX 25 158335 10
CMTL 11 56686 0
BEAT 23 71626 3

As you can see these stocks had an average of 19 hedge funds with bullish positions and the average amount invested in these stocks was $80 million, higher than the $53 million in NEOS’s case. Zogenix, Inc. (NASDAQ:ZGNX) is the most popular stock in this table. On the other hand Comtech Telecomm. Corp. (NASDAQ:CMTL) is the least popular one with only 11 bullish hedge fund positions. Compared to these stocks Neos Therapeutics Inc (NASDAQ:NEOS) is even less popular than CMTL. Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. The stock has only recently started trading and has yet to convince more investors that it represents a profitable opportunity.

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