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Hedge Funds Are Buying Heron Therapeutics Inc (HRTX)

A whopping number of 13F filings filed with U.S. Securities and Exchange Commission has been processed by Insider Monkey so that individual investors can look at the overall hedge fund sentiment towards the stocks included in their watchlists. These freshly-submitted public filings disclose money managers’ equity positions as of the end of the three-month period that ended September 30, so let’s proceed with the discussion of the hedge fund sentiment on Heron Therapeutics Inc (NASDAQ:HRTX).

Is Heron Therapeutics Inc (NASDAQ:HRTX) a buy right now? Prominent investors are becoming hopeful. The number of long hedge fund bets advanced by 6 in recent months. Our calculations also showed that HRTX isn’t among the 30 most popular stocks among hedge funds. HRTX was in 31 hedge funds’ portfolios at the end of September. There were 25 hedge funds in our database with HRTX holdings at the end of the previous quarter.

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 market by 18 percentage points since May 2014 through December 3, 2018 (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 our short portfolio.

Roberto-Mignone1

Let’s check out the fresh hedge fund action regarding Heron Therapeutics Inc (NASDAQ:HRTX).

How have hedgies been trading Heron Therapeutics Inc (NASDAQ:HRTX)?

At Q3’s end, a total of 31 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 24% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards HRTX over the last 13 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

HRTX_dec2018

The largest stake in Heron Therapeutics Inc (NASDAQ:HRTX) was held by Tang Capital Management, which reported holding $188.3 million worth of stock at the end of September. It was followed by Baker Bros. Advisors with a $159.1 million position. Other investors bullish on the company included Bridger Management, Rubric Capital Management, and Citadel Investment Group.

As one would reasonably expect, key hedge funds were breaking ground themselves. Balyasny Asset Management, managed by Dmitry Balyasny, initiated the most outsized position in Heron Therapeutics Inc (NASDAQ:HRTX). Balyasny Asset Management had $10 million invested in the company at the end of the quarter. Isaac Corre’s Governors Lane also initiated a $6.3 million position during the quarter. The other funds with new positions in the stock are Ori Hershkovitz’s Nexthera Capital, Benjamin A. Smith’s Laurion Capital Management, and Isaac Corre’s Governors Lane.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Heron Therapeutics Inc (NASDAQ:HRTX) but similarly valued. We will take a look at Tandem Diabetes Care Inc (NASDAQ:TNDM), The Cheesecake Factory Incorporated (NASDAQ:CAKE), Mallinckrodt Public Limited Company (NYSE:MNK), and Premier Inc (NASDAQ:PINC). This group of stocks’ market valuations are closest to HRTX’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
TNDM 22 308343 9
CAKE 21 152122 2
MNK 20 490595 -1
PINC 21 214420 3
Average 21 291370 3.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 21 hedge funds with bullish positions and the average amount invested in these stocks was $291 million. That figure was $785 million in HRTX’s case. Tandem Diabetes Care Inc (NASDAQ:TNDM) is the most popular stock in this table. On the other hand Mallinckrodt Public Limited Company (NYSE:MNK) is the least popular one with only 20 bullish hedge fund positions. Compared to these stocks Heron Therapeutics Inc (NASDAQ:HRTX) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.

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

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