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Did Hedge Funds Drop The Ball On Ocular Therapeutix Inc (OCUL) ?

Amid an overall bull market, many stocks that smart money investors were collectively bullish on surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Our research shows that most of the stocks that smart money likes historically generate strong risk-adjusted returns. That’s why we weren’t surprised when hedge funds’ top 20 large-cap stock picks generated a return of 37.4% through the end of November and outperformed the broader market benchmark by 9.9 percentage points.This is why following the smart money sentiment is a useful tool at identifying the next stock to invest in.

Is Ocular Therapeutix Inc (NASDAQ:OCUL) a buy right now? Prominent investors are selling. The number of long hedge fund bets were trimmed by 1 recently. Our calculations also showed that OCUL isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 91% since May 2014 and outperformed the Russell 2000 ETFs by nearly 40 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Noam Gottesman GLG Partners

Noam Gottesman of GLG Partners

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. With all of this in mind we’re going to go over the key hedge fund action surrounding Ocular Therapeutix Inc (NASDAQ:OCUL).

How have hedgies been trading Ocular Therapeutix Inc (NASDAQ:OCUL)?

Heading into the fourth quarter of 2019, a total of 4 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -20% from one quarter earlier. On the other hand, there were a total of 8 hedge funds with a bullish position in OCUL a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

When looking at the institutional investors followed by Insider Monkey, Opaleye Management, managed by James A. Silverman, holds the biggest position in Ocular Therapeutix Inc (NASDAQ:OCUL). Opaleye Management has a $8.4 million position in the stock, comprising 3.1% of its 13F portfolio. Coming in second is GLG Partners, managed by Noam Gottesman, which holds a $5.8 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Other professional money managers that hold long positions encompass Sculptor Capital, Ken Griffin’s Citadel Investment Group and . In terms of the portfolio weights assigned to each position Opaleye Management allocated the biggest weight to Ocular Therapeutix Inc (NASDAQ:OCUL), around 3.05% of its 13F portfolio. GLG Partners is also relatively very bullish on the stock, designating 0.02 percent of its 13F equity portfolio to OCUL.

Judging by the fact that Ocular Therapeutix Inc (NASDAQ:OCUL) has faced falling interest from the aggregate hedge fund industry, logic holds that there was a specific group of funds who were dropping their entire stakes heading into Q4. Interestingly, Allan Teh’s Kamunting Street Capital dropped the biggest stake of all the hedgies tracked by Insider Monkey, totaling an estimated $0.3 million in stock, and Michael Castor’s Sio Capital was right behind this move, as the fund sold off about $0.3 million worth. These moves are interesting, as total hedge fund interest dropped by 1 funds heading into Q4.

Let’s now take a look at hedge fund activity in other stocks similar to Ocular Therapeutix Inc (NASDAQ:OCUL). These stocks are Synalloy Corporation (NASDAQ:SYNL), AXT Inc (NASDAQ:AXTI), Five Prime Therapeutics Inc (NASDAQ:FPRX), and Greenlane Holdings, Inc. (NASDAQ:GNLN). All of these stocks’ market caps resemble OCUL’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
SYNL 4 20022 1
AXTI 8 12058 1
FPRX 18 41842 -2
GNLN 6 9719 0
Average 9 20910 0

View table here if you experience formatting issues.

As you can see these stocks had an average of 9 hedge funds with bullish positions and the average amount invested in these stocks was $21 million. That figure was $14 million in OCUL’s case. Five Prime Therapeutics Inc (NASDAQ:FPRX) is the most popular stock in this table. On the other hand Synalloy Corporation (NASDAQ:SYNL) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks Ocular Therapeutix Inc (NASDAQ:OCUL) is even less popular than SYNL. Hedge funds clearly dropped the ball on OCUL as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. A small number of hedge funds were also right about betting on OCUL as the stock returned 31.3% during the fourth quarter (through the end of November) and outperformed the market by an even larger margin.

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

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