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Hedge Funds Are Crazy About Zogenix, Inc. (ZGNX)

With the third-quarter round of 13F filings behind us it is time to take a look at the stocks in which some of the best money managers in the world preferred to invest or sell heading into the fourth quarter. One of these stocks was Zogenix, Inc. (NASDAQ:ZGNX).

Zogenix, Inc. (NASDAQ:ZGNX) was in 25 hedge funds’ portfolios at the end of the third quarter of 2015. ZGNX has seen an increase in support from the world’s most elite money managers lately. There were 15 hedge funds in our database with ZGNX 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 Comtech Telecomm. Corp. (NASDAQ:CMTL), Cardionet Inc (NASDAQ:BEAT), and First Community Bancshares Inc (NASDAQ:FCBC) to gather more data points.

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To most market participants, hedge funds are assumed to be underperforming, old investment tools of years past. While there are over 8000 funds trading at the moment, We choose to focus on the upper echelon of this group, around 700 funds. These investment experts handle the majority of the smart money’s total capital, and by paying attention to their best stock picks, Insider Monkey has unearthed a number of investment strategies that have historically exceeded the broader indices. Insider Monkey’s small-cap hedge fund strategy outperformed the S&P 500 index by 12 percentage points annually for a decade in their back tests.

With all of this in mind, we’re going to take a peek at the key action regarding Zogenix, Inc. (NASDAQ:ZGNX).

What have hedge funds been doing with Zogenix, Inc. (NASDAQ:ZGNX)?

At Q3’s end, a total of 25 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 67% from the second quarter. With hedge funds’ positions undergoing their usual ebb and flow, there exists an “upper tier” of noteworthy hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Hal Mintz’s Sabby Capital has the most valuable call position in Zogenix, Inc. (NASDAQ:ZGNX), worth close to $42 million, corresponding to 1.7% of its total 13F portfolio. On Sabby Capital’s heels is Baker Bros. Advisors, led by Julian Baker and Felix Baker, holding a $24.3 million position; the fund has 0.2% of its 13F portfolio invested in the stock. Other professional money managers that are bullish encompass Peter Kolchinsky’s RA Capital Management, Jeffrey Jay and David Kroin’s Great Point Partners and Kevin Kotler’s Broadfin Capital.

Consequently, specific money managers have jumped into Zogenix, Inc. (NASDAQ:ZGNX) headfirst. RA Capital Management, managed by Peter Kolchinsky, established the most outsized position in Zogenix, Inc. (NASDAQ:ZGNX). RA Capital Management had $22.7 million invested in the company at the end of the quarter. Ken Greenberg and David Kim’s Ghost Tree Capital also initiated a $5 million position during the quarter. The other funds with new positions in the stock are Eric Bannasch’s Cadian Capital, Vishal Bhutani and Joshua Bederman’s Pyrrho Capital Management, and Matthew Hulsizer’s PEAK6 Capital Management.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Zogenix, Inc. (NASDAQ:ZGNX) but similarly valued. We will take a look at Comtech Telecomm. Corp. (NASDAQ:CMTL), Cardionet Inc (NASDAQ:BEAT), First Community Bancshares Inc (NASDAQ:FCBC), and Aegean Marine Petroleum Network Inc. (NYSE:ANW). All of these stocks’ market caps are similar to ZGNX’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CMTL 11 56686 0
BEAT 23 71626 3
FCBC 6 6807 -1
ANW 14 85797 -5

As you can see these stocks had an average of 14 hedge funds with bullish positions and the average amount invested in these stocks was $55 million, which is lower than the $158 million in ZGNX’s case. Cardionet Inc (NASDAQ:BEAT) is the most popular stock in this table with 23 funds reporting long stakes. On the other hand First Community Bancshares Inc (NASDAQ:FCBC) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks Zogenix, Inc. (NASDAQ:ZGNX) 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.

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