Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that’s why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to smartest analysts and expensive data/information sources that individual investors can’t match. So should one consider investing in Esperion Therapeutics, Inc. (NASDAQ:ESPR)? The smart money sentiment can provide an answer to this question.
Is Esperion Therapeutics, Inc. (NASDAQ:ESPR) a buy right now? Hedge funds were becoming more confident. The number of long hedge fund bets moved up by 1 lately. Esperion Therapeutics, Inc. (NASDAQ:ESPR) was in 17 hedge funds’ portfolios at the end of March. The all time high for this statistic is 22. Our calculations also showed that ESPR isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings). There were 16 hedge funds in our database with ESPR holdings at the end of December.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. 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 115 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.
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, pet market is growing at a 7% annual rate and is expected to reach $110 billion in 2021. So, we are checking out the 5 best stocks for animal lovers. We go through lists like the 15 best Jim Cramer stocks to identify the next Tesla that will deliver outsized returns. 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. You can subscribe to our free daily newsletter on our homepage. Keeping this in mind we’re going to review the new hedge fund action encompassing Esperion Therapeutics, Inc. (NASDAQ:ESPR).
Do Hedge Funds Think ESPR Is A Good Stock To Buy Now?
Heading into the second quarter of 2021, a total of 17 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 6% from the fourth quarter of 2020. Below, you can check out the change in hedge fund sentiment towards ESPR over the last 23 quarters. With hedge funds’ sentiment swirling, there exists a select group of notable hedge fund managers who were upping their stakes substantially (or already accumulated large positions).
More specifically, Platinum Asset Management was the largest shareholder of Esperion Therapeutics, Inc. (NASDAQ:ESPR), with a stake worth $44.9 million reported as of the end of March. Trailing Platinum Asset Management was Point72 Asset Management, which amassed a stake valued at $18.2 million. Pentwater Capital Management, Rhenman & Partners Asset Management, and Millennium Management 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 Rhenman & Partners Asset Management allocated the biggest weight to Esperion Therapeutics, Inc. (NASDAQ:ESPR), around 1.16% of its 13F portfolio. Platinum Asset Management is also relatively very bullish on the stock, earmarking 1 percent of its 13F equity portfolio to ESPR.
As aggregate interest increased, key hedge funds have been driving this bullishness. Point72 Asset Management, managed by Steve Cohen, assembled the most valuable position in Esperion Therapeutics, Inc. (NASDAQ:ESPR). Point72 Asset Management had $18.2 million invested in the company at the end of the quarter. Israel Englander’s Millennium Management also made a $1.4 million investment in the stock during the quarter. The other funds with brand new ESPR positions are Frank Fu’s CaaS Capital, Peter Muller’s PDT Partners, and Nick Thakore’s Diametric Capital.
Let’s also examine hedge fund activity in other stocks similar to Esperion Therapeutics, Inc. (NASDAQ:ESPR). We will take a look at Endeavour Silver Corp. (NYSE:EXK), HEXO Corp. (NYSE:HEXO), Bluegreen Vacations Corporation (NYSE:BXG), Trueblue Inc (NYSE:TBI), ATN International, Inc. (NASDAQ:ATNI), Cincinnati Bell Inc. (NYSE:CBB), and Contango Oil & Gas Company (NYSE:MCF). This group of stocks’ market valuations match ESPR’s market valuation.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 8.1 hedge funds with bullish positions and the average amount invested in these stocks was $40 million. That figure was $119 million in ESPR’s case. Trueblue Inc (NYSE:TBI) is the most popular stock in this table. On the other hand Bluegreen Vacations Corporation (NYSE:BXG) is the least popular one with only 3 bullish hedge fund positions. Compared to these stocks Esperion Therapeutics, Inc. (NASDAQ:ESPR) is more popular among hedge funds. Our overall hedge fund sentiment score for ESPR is 79.2. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 28.5% in 2021 through July 23rd and still beat the market by 10.1 percentage points. Unfortunately ESPR wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on ESPR were disappointed as the stock returned -44.4% since the end of the first quarter (through 7/23) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market since 2019.
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Disclosure: None. This article was originally published at Insider Monkey.