2019 Review: Top Hedge Fund Stocks vs. Pacira BioSciences, Inc. (PCRX)

We are still in an overall bull market and many stocks that smart money investors were piling into surged in 2019. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 57% each. Hedge funds’ top 3 stock picks returned 44.6% this year and beat the S&P 500 ETFs by nearly 14 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like Pacira BioSciences, Inc. (NASDAQ:PCRX).

Pacira BioSciences, Inc. (NASDAQ:PCRX) shares haven’t seen a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 28 hedge funds’ portfolios at the end of September. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Studio City International Holdings Limited (NYSE:MSC), Shenandoah Telecommunications Company (NASDAQ:SHEN), and Kaiser Aluminum Corporation (NASDAQ:KALU) to gather more data points. Our calculations also showed that PCRX isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video at the end of this article for Q2 rankings).

If you’d ask most investors, hedge funds are assumed to be underperforming, outdated financial vehicles of the past. While there are greater than 8000 funds in operation at present, Our researchers hone in on the crème de la crème of this group, approximately 750 funds. These hedge fund managers watch over bulk of the smart money’s total capital, and by shadowing their unrivaled investments, Insider Monkey has spotted a few investment strategies that have historically outstripped the market. Insider Monkey’s flagship short hedge fund strategy outpaced the S&P 500 short ETFs by around 20 percentage points per year since its inception in May 2014. Our portfolio of short stocks lost 27.8% since February 2017 (through November 21st) even though the market was up more than 39% during the same period. We just shared a list of 7 short targets in our latest quarterly update .


John Paulson of Paulson & Co

We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius’ weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock already gained 20 percent. Keeping this in mind we’re going to check out the new hedge fund action surrounding Pacira BioSciences, Inc. (NASDAQ:PCRX).

How are hedge funds trading Pacira BioSciences, Inc. (NASDAQ:PCRX)?

At the end of the third quarter, a total of 28 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the previous quarter. The graph below displays the number of hedge funds with bullish position in PCRX over the last 17 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists an “upper tier” of key hedge fund managers who were adding to their stakes meaningfully (or already accumulated large positions).

The largest stake in Pacira BioSciences, Inc. (NASDAQ:PCRX) was held by Paulson & Co, which reported holding $65.4 million worth of stock at the end of September. It was followed by venBio Select Advisor with a $60.9 million position. Other investors bullish on the company included D E Shaw, Renaissance Technologies, and Rock Springs Capital Management. In terms of the portfolio weights assigned to each position Tamarack Capital Management allocated the biggest weight to Pacira BioSciences, Inc. (NASDAQ:PCRX), around 7.69% of its 13F portfolio. venBio Select Advisor is also relatively very bullish on the stock, setting aside 2.54 percent of its 13F equity portfolio to PCRX.

Judging by the fact that Pacira BioSciences, Inc. (NASDAQ:PCRX) has witnessed falling interest from the aggregate hedge fund industry, it’s safe to say that there lies a certain “tier” of money managers that elected to cut their entire stakes by the end of the third quarter. Intriguingly, Mitchell Blutt’s Consonance Capital Management said goodbye to the largest position of the “upper crust” of funds tracked by Insider Monkey, totaling an estimated $121.8 million in stock. Christopher James’s fund, Partner Fund Management, also sold off its stock, about $31.9 million worth. These transactions are important to note, as total hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Pacira BioSciences, Inc. (NASDAQ:PCRX) but similarly valued. We will take a look at Studio City International Holdings Limited (NYSE:MSC), Shenandoah Telecommunications Company (NASDAQ:SHEN), Kaiser Aluminum Corporation (NASDAQ:KALU), and Hub Group Inc (NASDAQ:HUBG). This group of stocks’ market valuations are similar to PCRX’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
MSC 4 243082 0
SHEN 15 78895 -3
KALU 20 118922 5
HUBG 21 255820 3
Average 15 174180 1.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 15 hedge funds with bullish positions and the average amount invested in these stocks was $174 million. That figure was $395 million in PCRX’s case. Hub Group Inc (NASDAQ:HUBG) is the most popular stock in this table. On the other hand Studio City International Holdings Limited (NYSE:MSC) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks Pacira BioSciences, Inc. (NASDAQ:PCRX) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.1% in 2019 through December 23rd and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. Unfortunately PCRX wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on PCRX were disappointed as the stock returned 6.6% so far in 2019 (through 12/23) and trailed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 65 percent of these stocks already outperformed the market in 2019.
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

Disclosure: None. This article was originally published at Insider Monkey.