Are Hedge Funds Losing Interest In Ocera Therapeutics Inc (OCRX)?

We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Citadel Investment Group. One hedge fund selling its entire position doesn’t always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don’t think this is the case in this case because none of the 700+ hedge funds tracked by Insider Monkey identified OCRX as a viable investment and initiated a position in the stock.

Let’s go over hedge fund activity in other stocks similar to Ocera Therapeutics Inc (NASDAQ:OCRX). These stocks are AXT Inc (NASDAQ:AXTI), BlueLinx Holdings Inc. (NYSE:BXC), RCS Capital Corp (NYSE:RCAP), and Quest Resource Holding Corp (NASDAQ:QRHC). This group of stocks’ market values match OCRX’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
AXTI 4 9351 0
BXC 7 45941 -3
RCAP 15 16564 -4
QRHC 7 3094 0

As you can see these stocks had an average of 8.25 hedge funds with bullish positions and the average amount invested in these stocks was $19 million, higher than the $15 million figure in OCRX’s case. RCS Capital Corp (NYSE:RCAP) is the most popular stock in this table with 15 funds holding shares, while AXT Inc (NASDAQ:AXTI) is the least popular one. Ocera Therapeutics Inc (NASDAQ:OCRX) is not the most popular stock in this group, but hedge fund interest is still above average. This is a slightly positive signal, but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard RCAP might be a better candidate to consider a long position.