Hedge Funds Are Crazy About Enanta Pharmaceuticals Inc (ENTA)

Reputable billionaire investors such as Nelson Peltz and David Tepper generate exorbitant profits for their wealthy accredited investors (a minimum of $1 million in investable assets would be required to invest in a hedge fund and most successful hedge funds won’t accept your savings unless you commit at least $5 million) by pinpointing winning small-cap stocks. There is little or no publicly-available information at all on some of these small companies, which makes it hard for an individual investor to pin down a winner within the small-cap space. However, hedge funds and other big asset managers can do the due diligence and analysis for you instead, thanks to their highly-skilled research teams and vast resources to conduct an appropriate evaluation process. Looking for potential winners within the small-cap galaxy of stocks? We believe following the smart money is a good starting point.

Is Enanta Pharmaceuticals Inc (NASDAQ:ENTA) undervalued? The best stock pickers are definitely getting more optimistic. The number of long hedge fund investments inched up by 2 lately. ENTA was in 12 hedge funds’ portfolios at the end of September. There were 10 hedge funds in our database with ENTA positions at the end of the previous quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Hostess Brands Inc (NASDAQ:GRSH), Changyou.Com Ltd (ADR) (NASDAQ:CYOU), and Capital Senior Living Corporation (NYSE:CSU) to gather more data points.

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Keeping this in mind, we’re going to view the fresh action regarding Enanta Pharmaceuticals Inc (NASDAQ:ENTA).

How are hedge funds trading Enanta Pharmaceuticals Inc (NASDAQ:ENTA)?

At the end of the third quarter, a total of 12 of the hedge funds tracked by Insider Monkey were long this stock, a jump of 20% from the previous quarter. The graph below displays the number of hedge funds with bullish position in ENTA over the last 5 quarters. With the smart money’s sentiment swirling, there exists a few notable hedge fund managers who were increasing their holdings substantially (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Great Point Partners, led by Jeffrey Jay and David Kroin, holds the most valuable position in Enanta Pharmaceuticals Inc (NASDAQ:ENTA). According to regulatory filings, the fund has a $21 million position in the stock, comprising 5.4% of its 13F portfolio. On Great Point Partners’s heels is Renaissance Technologies, one of the largest hedge funds in the world, holding a $18.7 million position; less than 0.1% of its 13F portfolio is allocated to the company. Remaining hedge funds and institutional investors with similar optimism contain Ken Greenberg and David Kim’s Ghost Tree Capital, Steven Boyd’s Armistice Capital and Israel Englander’s Millennium Management. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.

With a general bullishness amongst the heavyweights, key money managers were breaking ground themselves. Ghost Tree Capital initiated the biggest position in Enanta Pharmaceuticals Inc (NASDAQ:ENTA). According to its latest 13F filing, the fund had $6.7 million invested in the company at the end of the quarter. D. E. Shaw’s D E Shaw also made a $2.3 million investment in the stock during the quarter. The following funds were also among the new ENTA investors: Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital and Glenn Russell Dubin’s Highbridge Capital Management.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Enanta Pharmaceuticals Inc (NASDAQ:ENTA) but similarly valued. We will take a look at Hostess Brands Inc (NASDAQ:GRSH), Changyou.Com Ltd (ADR) (NASDAQ:CYOU), Capital Senior Living Corporation (NYSE:CSU), and Tejon Ranch Company (NYSE:TRC). All of these stocks’ market caps resemble ENTA’s market cap.

As you can see these stocks had an average of 17 hedge funds with bullish positions and the average amount invested in these stocks was $135 million. That figure was $66 million in ENTA’s case. Hostess Brands Inc (NASDAQ:GRSH) is the most popular stock in this table. On the other hand Tejon Ranch Company (NYSE:TRC) is the least popular one with only 7 bullish hedge fund positions. Enanta Pharmaceuticals Inc (NASDAQ:ENTA) 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 GRSH might be a better candidate to consider taking a long position in.

Disclosure: none.