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Three Stocks Fall on Monday but Hedge Fund Data Suggests You Might Want to Buy Some of Them on the Drop

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Shares of Verastem Inc (NASDAQ:VSTM), Huntsman Corporation (NYSE:HUN), and TrovaGene Inc (NASDAQ:TROV) are among the top losers today as the firms’ share prices have declined by 65%, 24%, and 8%, respectively. Verastem shares dropped on the back of news that the Phase 2 study of its VS-6063 drug was stopped. Meanwhile, Hunstman sank as a reaction to the firm’s announcement on Friday of headwinds expected to negatively impact the firm’s current quarter. The fall of TrovaGene’s stock, on the other hand, doesn’t seem to be related to any significant developments and comes in contradiction with the latest updates surrounding the company. Let’s take a closer look at each one of these three companies and see if the hedge fund sentiment suggest that their decline represents a good buying opportunity.

Biotech Stocks 8

At Insider Monkey, we track hedge funds’ moves in order to identify actionable patterns and profit from them. Our research has shown that hedge funds’ large-cap stock picks historically delivered a monthly alpha of six basis points, though these stocks underperformed the S&P 500 Total Return Index by an average of seven basis points per month between 1999 and 2012. On the other hand, the 15 most popular small-cap stocks among hedge funds outperformed the S&P500 Index by an average of 95 basis points per month (read more details here). Since the official launch of our small-cap strategy in August 2012, it has performed just as predicted, returning 118% and beating the market by more than 60 percentage points. We believe the data is clear: investors will be better off by focusing on small-cap stocks utilizing hedge fund expertise rather than large-cap stocks.

Verastem Inc (NASDAQ:VSTM)’s shares are being punished today after the firm halted its mid-stage Phase 2 study on VS-6063, its lead treatment for mesothelioma cancer. According to the firm, a Data Safety Monitoring Board review revealed that there was no sufficient level of effectiveness for the treatment to continue enrolling patients for the study. Aside from the failure of VS-6063 for the treatment of mesothelioma cancer, the development casts doubt on the regimen’s prospects for the treatment of other types of cancer, such as lung and ovarian cancers which the treatment is also being tested to cure.

According to our data, the number of hedge funds long Verastem Inc (NASDAQ:VSTM) was unchanged at 13 by the end of the second quarter. There was a slight inflow of capital, however, as the total value of holdings of these funds decreased by 24.11% during the quarter to $30.74 million, amid a 25.86% decline of the stock. Hedge funds owned 11.20% of all Verastem shares at the end of June. The hedge fund with the largest stake in the firm was Kerr Neilson’s Platinum Asset Management with 1.73 million shares.

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