Hedge Fund Sentiment Says You Should Be Wary of One of these Three Tuesday Gainers

The Phoenix Companies, Inc. (NYSE:PNX), Ceres Inc (NASDAQ:CERE) and Rockwell Medical Inc (NASDAQ:RMTI) have all registered sharp climbs today for a myriad of reasons. However, hedge funds do not like all of these Tuesday high-fliers as we will see in the discussion below.

We pay attention to hedge funds’ moves because our research has shown that hedge funds are extremely talented at picking stocks on the long side of their portfolios. It is true that hedge funds have been underperforming the market in recent years. However, this was mainly because hedge funds’ short stock picks lost a ton of money during the bull market that started in March 2009. Hedge fund investors also paid an arm and a leg for the services they received. We have been tracking the performance of hedge funds’ 15 most popular stock picks in real time since the end of August 2012. These stocks have returned 118% since then and outperformed the S&P500 Index by more than 60 percentage points (see more details here). That’s why we believe it is important to pay attention to hedge fund sentiment. Plus, we also don’t like paying huge fees.

The Phoenix Companies, Inc. (NYSE:PNX)’s shares have flown over 150% higher on Tuesday morning after the firm revealed that it has entered into a definitive acquisition agreement with Nassau Reinsurance Group Holdings L.P. Nassau Reinsurance will pay $37.50 per Phoneix share, valuing the company at $217.2 million. This is a 188% premium over Phoenix’s closing price on Monday. Nassau will also be injecting $100 million in equity capital in Phoenix once it becomes a wholly-owned subsidiary to stabilize and improve Phoenix’s balance sheet. The deal is expected to close in 2016, and Phoenix will become Nassau’s life and annuity platform in the U.S.

There was a slight influx of capital into The Phoenix Companies, Inc. (NYSE:PNX) stock in the second quarter from hedge funds, as despite the 63.51% decrease of the stock, the total value of hedge funds’ holdings in the firm declined by only 55.32% to $10.21 million. It should be said, nonetheless, that there was one fewer hedge fund long in the stock by the end of June, compared to the end of March. Hedge funds owned 9.60% of the Phoenix at the end of the second quarter. Martin Hughes’ Toscafund Asset Management owned 438,799 shares of Phoenix at the end of June.

Ceres Inc (NASDAQ:CERE)’s shares were over 31% in green, after the firm announced that KWS SAAT SE has licensed the firm’s Persephone bioinformatics technology. Under the agreement, KWS SAAT SE will be examining the technology, which lets researchers study DNA-related information in a manner similar to how mapping technology lets users to explore locations.

Ceres Inc (NASDAQ:CERE) is a company that has been under the radars of most large investors. Ken Griffin’s Citadel Investment Group closed its stake during the second quarter, making Jim Simons’ Renaissance Technologies the only shareholder of Ceres shares among the hedge funds Insider Monkey tracks. However, Renaissance’s stake was reduced by 86% quarter-over-quarter to 90,673 shares.

Meanwhile, Rockwell Medical Inc (NASDAQ:RMTI)’s stock is up nearly 20% today after a decline of over 15% on Monday, on the back of Oppenheimer reiterating its ‘Buy’ rating and $26 per share price target on the stock. According to analyst Ling Wang, shares of the biopharmaceutical firm have declined significantly, which represents a good entry point for potential investors, especially since the price is below the level reached when the company’s drug Triferic was approved. The analyst also cited potential ramp ups in Triferic and Calcitriol in the second half of 2015 as possible catalysts for the stock’s growth. Triferic was only launched in the U.S. two weeks ago.

Rockwell Medical Inc (NASDAQ:RMTI)’s stock improved by 47.48% in the second quarter, but the value of hedge funds’ holdings only increased by 5.81% from the previous quarter to $18.85 million. There were also three fewer funds which had long positions in the stock bringing this figure down to eight at the end of the second quarter. Bihua Chen’s Cormorant Asset Management was the largest shareholder with a stake of 340,000 shares. On the other hand, Peter Muller’s PDT Partners dumped all of its 47,952 shares of Rockwell, that it had acquired a quarter earlier.

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