Did Hedge Funds Make The Right Call On ADMA Biologics Inc (ADMA) ?

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 821 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, a week after the market trough. We are almost done with the second quarter. Investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned almost 20% this quarter. In this article we look at how hedge funds traded ADMA Biologics Inc (NASDAQ:ADMA) and determine whether the smart money was really smart about this stock.

ADMA Biologics Inc (NASDAQ:ADMA) shareholders have witnessed an increase in enthusiasm from smart money lately. ADMA was in 19 hedge funds’ portfolios at the end of March. There were 12 hedge funds in our database with ADMA positions at the end of the previous quarter. Our calculations also showed that ADMA isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 58 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.

Joseph Edelman of Perceptive Advisors

Joseph Edelman of Perceptive Advisors

At Insider Monkey we scour multiple sources to uncover the next great investment idea. With Federal Reserve creating trillions of dollars out of thin air, we believe gold prices will keep increasing. So, we are checking out gold stocks like this small gold mining company. We go through lists like the 10 most profitable companies in America to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. Keeping this in mind let’s review the fresh hedge fund action surrounding ADMA Biologics Inc (NASDAQ:ADMA).

What does smart money think about ADMA Biologics Inc (NASDAQ:ADMA)?

At Q1’s end, a total of 19 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 58% from one quarter earlier. On the other hand, there were a total of 7 hedge funds with a bullish position in ADMA a year ago. With the smart money’s sentiment swirling, there exists a select group of noteworthy hedge fund managers who were upping their holdings meaningfully (or already accumulated large positions).

More specifically, Perceptive Advisors was the largest shareholder of ADMA Biologics Inc (NASDAQ:ADMA), with a stake worth $47.8 million reported as of the end of September. Trailing Perceptive Advisors was Consonance Capital Management, which amassed a stake valued at $9.7 million. 683 Capital Partners, Sphera Global Healthcare Fund, and Prosight Capital were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Prosight Capital allocated the biggest weight to ADMA Biologics Inc (NASDAQ:ADMA), around 1.67% of its 13F portfolio. Perceptive Advisors is also relatively very bullish on the stock, dishing out 1.24 percent of its 13F equity portfolio to ADMA.

With a general bullishness amongst the heavyweights, specific money managers have been driving this bullishness. Sphera Global Healthcare Fund, managed by Doron Breen and Mori Arkin, assembled the most valuable position in ADMA Biologics Inc (NASDAQ:ADMA). Sphera Global Healthcare Fund had $5.3 million invested in the company at the end of the quarter. Lawrence Hawkins’s Prosight Capital also initiated a $3.6 million position during the quarter. The following funds were also among the new ADMA investors: Benjamin A. Smith’s Laurion Capital Management, Paul Marshall and Ian Wace’s Marshall Wace LLP, and Neil Shahrestani’s Ikarian Capital.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as ADMA Biologics Inc (NASDAQ:ADMA) but similarly valued. These stocks are Paysign, Inc. (NASDAQ:PAYS), OneSpaWorld Holdings Limited (NASDAQ:OSW), Civista Bancshares, Inc. (NASDAQ:CIVB), and Consolidated Water Co. Ltd. (NASDAQ:CWCO). This group of stocks’ market valuations are similar to ADMA’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
PAYS 11 14615 -4
OSW 15 33475 4
CIVB 11 13075 1
CWCO 5 14678 0
Average 10.5 18961 0.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 10.5 hedge funds with bullish positions and the average amount invested in these stocks was $19 million. That figure was $87 million in ADMA’s case. OneSpaWorld Holdings Limited (NASDAQ:OSW) is the most popular stock in this table. On the other hand Consolidated Water Co. Ltd. (NASDAQ:CWCO) is the least popular one with only 5 bullish hedge fund positions. Compared to these stocks ADMA Biologics Inc (NASDAQ:ADMA) is more popular among hedge funds. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 18.6% in 2020 through July 27th and still beat the market by 17.1 percentage points. Unfortunately ADMA wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on ADMA were disappointed as the stock returned 0% since the end of the first quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.

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