Three stocks are making some major noise in today’s trading session, with gains of over 15% for all three. The companies behind the stocks making these gargantuan gains are Bellerophon Therapeutics Inc (NASDAQ:BLPH), Synaptics, Incorporated (NASDAQ:SYNA), and Depomed Inc (NASDAQ:DEPO), and we’ll run through the action on each and their accompanying hedge fund sentiment.
Let’s start with Bellerophon Therapeutics Inc (NASDAQ:BLPH), which we’ve now covered three times in the past few days owing to the extreme volatility in the stock. On September 25 it enjoyed a massive swing to the upside of about 69% following the release of positive data related to its Phase 2 study of INOpulse, for the treatment of Pulmonary Arterial Hypertension. However, just a few days later it was back in the news due to its stock heading sharply in the other direction, giving back most of its Friday gains in the first two trading sessions of this week, as the market seemingly decided that the gains were an overreaction, and that despite the positive news, the market for the treatment may not be overly big.
Yet here we are on Wednesday and momentum appears to have swung back to the buy side again, as shares are up by a touch over 25%. The push today follows more information being released related to INOpulse, at the European Respiratory Society (ERS) International Congress 2015 in Amsterdam. The newly-released data was from a small trial of six patients with pulmonary hypertension, each of which was given an acute dose of INOpulse nitric oxide. The results showed increased blood flow in the lungs of all six patients, while oxygen saturation was preserved.
Hedge funds we track were quite positive about Bellerophon Therapeutics Inc (NASDAQ:BLPH), owning 44.90% of the biotech’s shares as of June 30. In all, six funds we track had positions valued at $45.99 million at that time. Also noteworthy is the fact that Julian Baker and Felix Baker’s Baker Bros. Advisors was the top shareholder of those six, with 350,000 shares at the end of June. The stock picks of the healthcare fund have been exceptional this year, ranking it as one of the top funds in our database.
Most investors don’t understand hedge funds and indicators that are based on hedge funds’ activity. They ignore hedge funds because of their recent poor performance in the bull market. Our research indicates that hedge funds partly underperformed because they aren’t 100% long. Hedge funds’ fees are also very large compared to the returns generated, which reduces the net returns delivered to investors. We uncovered through extensive research that historically, hedge funds’ long positions in certain stocks actually outperformed the market greatly, and it has held true to this day. For instance, the 15 most popular small-cap stocks among funds has beaten the S&P 500 Index by more than 60 percentage points since the end of August 2012. These stocks returned a cumulative of 118% vs. less than 58% for the S&P 500 Index (read the details). That’s why we believe investors should pay attention to what hedge funds are buying, particularly in the small-cap sector, rather than what their net returns are, which the media primarily focuses on.