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Should You Buy Supernus Pharmaceuticals Inc (SUPN)?

Looking for high-potential stocks? Just follow the big players within the hedge fund industry! This is not an ad, but let’s take a brief look at what statistics has to say about hedge funds’ stock picking abilities. The Standard and Poor’s 500 Index returned approximately 5.2% in the 12 months ending October 30, with more than 51% of the stocks in the index failing to beat the benchmark. Therefore, the odds that one will pin down a ‘winner’ by randomly picking a stock are less than the odds in a fair coin-tossing game. Conversely, hedge funds’ 30 preferred S&P 500 stocks (as of September 2014) generated a return of 9.5% during the same 12-month period, while 63% of these stock picks outperformed the broader market benchmark. Coincidence? It might happen to be so, but it is unlikely. Our research covering a 16-year period indicates that hedge funds’ stock picks generate superior risk-adjusted returns. That’s why we believe it is wise to check hedge fund activity before you invest your time or your savings on a stock like Supernus Pharmaceuticals Inc (NASDAQ:SUPN).

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Supernus Pharmaceuticals Inc (NASDAQ:SUPN) was in 23 hedge funds’ portfolio at the end of September and the sentiment has not changed over the quarter. At the end of this article we will also compare SUPN to other stocks including General Communication, Inc. (NASDAQ:GNCMA), VASCO Data Security International, Inc. (NASDAQ:VDSI), and Encore Wire Corporation (NASDAQ:WIRE) to get a better sense of its popularity.

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In the 21st century investor’s toolkit, there is a large number of tools that stock market investors can use to size up their holdings. A pair of the less utilized tools are hedge fund and insider trading sentiment. Hedge fund experts at Insider Monkey have shown that, historically, those who follow the best picks of the top investment managers can outpace their index-focused peers by a superb margin (see the details here).

With all of this in mind, we’re going to go over the key action surrounding Supernus Pharmaceuticals Inc (NASDAQ:SUPN).

What have hedge funds been doing with Supernus Pharmaceuticals Inc (NASDAQ:SUPN)?

Heading into Q4, a total of 23 of the hedge funds tracked by Insider Monkey were bullish in this stock. With the smart money’s capital changing hands, there exists an “upper tier” of notable hedge fund managers who held the largest stakes.

Of the funds tracked by Insider Monkey, Michael Murphy and Daniel Donoghue’s Discovery Group had the biggest position in Supernus Pharmaceuticals Inc (NASDAQ:SUPN), worth close to $14.4 million, corresponding to 5% of its total 13F portfolio. Coming in second is HealthInvest Partners AB, managed by Anders Hallberg and Carl Bennet, which held an $11 million position; the fund has 6.5% of its 13F portfolio invested in the stock. Some other peers with similar optimism comprise James A. Silverman’s Opaleye Management, Robert B. Gillam’s McKinley Capital Management and Paul Hondros’s AlphaOne Capital Partners.

On the other hand, Joseph Edelman’s Perceptive Advisors dropped the biggest position of all the hedgies monitored by Insider Monkey, worth an estimated $7 million in stock. Justin John Ferayorni’s fund, Tamarack Capital Management, also dumped its stock, about $2.5 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s check out hedge fund activity in other stocks similar to Supernus Pharmaceuticals Inc (NASDAQ:SUPN). We will take a look at General Communication, Inc. (NASDAQ:GNCMA), VASCO Data Security International, Inc. (NASDAQ:VDSI), Encore Wire Corporation (NASDAQ:WIRE), and Enanta Pharmaceuticals Inc (NASDAQ:ENTA). This group of stocks’ market caps match SUPN’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
GNCMA 13 30267 3
VDSI 16 110477 -5
WIRE 11 41954 -2
ENTA 6 37302 -4

As you can see these stocks had an average of 11 hedge funds with bullish positions and the average amount invested in these stocks was $55 million. Compared to these stocks Supernus Pharmaceuticals Inc (NASDAQ:SUPN) is more popular among hedge funds and considering that hedge funds are fond of this stock, it may be a good idea to analyze it in detail and potentially follow the smart money into the company.

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