Do Hedge Funds Love Tokai Pharmaceuticals Inc (TKAI)?

It was a rough third quarter for many hedge funds, which were naturally unable to overcome the big dip in the broad market, as the S&P 500 fell by about 7% during the quarter. The Russell 2000, composed of smaller companies, performed even worse, trailing the S&P by about 14 percentage points between June 25 and October 30, as investors fled less-known quantities for safe havens. This was the case with hedge funds, who we heard were pulling money from the market amid the volatility, which included money from small-cap stocks, which they invest in at a higher rate than other investors. This action contributed to the greater decline in these stocks during the tumultuous period. We will study how this market volatility affected their sentiment towards Tokai Pharmaceuticals Inc (NASDAQ:TKAI) during the quarter below.

Tokai Pharmaceuticals Inc (NASDAQ:TKAI) shares haven’t seen a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 7 hedge funds’ portfolios at the end of the third quarter of 2015. At the end of this article, we will also compare Tokai Pharmaceuticals Inc (NASDAQ:TKAI) to other stocks, including MCBC Holdings Inc (NASDAQ:MCFT), Mazor Robotics Ltd – ADR (NASDAQ:MZOR), and Fluidigm Corporation (NASDAQ:FLDM) to get a better sense of its popularity.

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In the 21st century investor’s toolkit, there are many methods shareholders can use to assess publicly traded companies. A duo of the most under-the-radar methods are hedge fund and insider trading moves. Our experts have shown that, historically, those who follow the best picks of the elite hedge fund managers can outclass the broader indices by a significant margin (see the details here).

Now, let’s take a look at the latest action encompassing Tokai Pharmaceuticals Inc (NASDAQ:TKAI).

How have hedgies been trading Tokai Pharmaceuticals Inc (NASDAQ:TKAI)?

At the end of the third quarter, a total of 7 of the hedge funds tracked by Insider Monkey held long positions in this stock, unchanged from the second quarter. With hedgies’ capital changing hands, there exists a few notable hedge fund managers who were upping their stakes meaningfully (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Mark Kingdon’s Kingdon Capital has the number one position in Tokai Pharmaceuticals Inc (NASDAQ:TKAI), worth close to $6.8 million, accounting for 0.3% of its total 13F portfolio. Coming in second is Sabby Capital, managed by Hal Mintz, which holds a $6.8 million position; 0.3% of its 13F portfolio is allocated to the stock. Remaining hedge funds and institutional investors that hold long positions encompass Joseph Edelman’s Perceptive Advisors, Anand Parekh’s Alyeska Investment Group, and Ross Berman’s Green Owl Capital Management.

Due to the fact that Tokai Pharmaceuticals Inc (NASDAQ:TKAI) has witnessed a bearish sentiment from the smart money, it’s safe to say that there were a few funds that decided to sell off their entire stakes heading into Q4. Intriguingly, Jason Karp’s Tourbillon Capital Partners said goodbye to the largest position of the 700 funds monitored by Insider Monkey, worth an estimated $6.9 million in stock. Rob Citrone’s fund, Discovery Capital Management, also said goodbye to its stock, about $0.2 million worth of shares. These bearish behaviors are interesting, as total hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s check out hedge fund activity in other stocks similar to Tokai Pharmaceuticals Inc (NASDAQ:TKAI). We will take a look at MCBC Holdings Inc (NASDAQ:MCFT), Mazor Robotics Ltd – ADR (NASDAQ:MZOR), Fluidigm Corporation (NASDAQ:FLDM), and Invivo Therapeutics Holdings Corp (NASDAQ:NVIV). All of these stocks’ market caps match Tokai Pharmaceuticals Inc (NASDAQ:TKAI)’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
MCFT 7 143621 7
MZOR 6 18336 2
FLDM 11 56420 -4
NVIV 4 2559 2

As you can see, these stocks had an average of 7 hedge funds with bullish positions and the average amount invested in these stocks was $55 million. That figure was $24 million in Tokai Pharmaceuticals Inc (NASDAQ:TKAI)’s case. Fluidigm Corporation (NASDAQ:FLDM) is the most popular stock in this table. On the other hand, Invivo Therapeutics Holdings Corp (NASDAQ:NVIV) is the least popular one with only 4 bullish hedge fund positions. Tokai Pharmaceuticals Inc (NASDAQ:TKAI) is not the least popular stock in this group, but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard, Fluidigm Corporation (NASDAQ:FLDM) might be a better candidate to consider a long position.