We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do (like Ackman’s recent Valeant losses). However, it is still good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards Sagent Pharmaceuticals Inc (NASDAQ:SGNT).
Sagent Pharmaceuticals Inc (NASDAQ:SGNT) was in 10 hedge funds’ portfolios at the end of the third quarter of 2015. Sagent Pharmaceuticals Inc (NASDAQ:SGNT) shareholders have witnessed a decrease in support from the world’s most elite money managers in recent months. There were 18 hedge funds in our database with Sagent Pharmaceuticals Inc (NASDAQ:SGNT) 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 The Spectranetics Corporation (NASDAQ:SPNC), and Kansas City Life Insurance Co (NASDAQ:KCLI) to gather more data points.
According to most traders, hedge funds are assumed to be slow, outdated financial vehicles of years past. While there are over 8000 funds in operation today, our researchers hone in on the elite of this club, around 700 funds. These investment experts administer most of all hedge funds’ total capital, and by watching their matchless stock picks, Insider Monkey has revealed various investment strategies that have historically surpassed the S&P 500 index. Insider Monkey’s small-cap hedge fund strategy outrun the S&P 500 index by 12 percentage points annually for a decade in their back tests.
With all of this in mind, let’s analyze the fresh action surrounding Sagent Pharmaceuticals Inc (NASDAQ:SGNT).
What have hedge funds been doing with Sagent Pharmaceuticals Inc (NASDAQ:SGNT)?
At the end of the third quarter, a total of 10 of the hedge funds tracked by Insider Monkey were bullish on this stock, a drop of 44% from the previous quarter. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were increasing their holdings substantially (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Arthur B Cohen and Joseph Healey’s Healthcor Management LP has the largest position in Sagent Pharmaceuticals Inc (NASDAQ:SGNT), worth close to $19.2 million, comprising 1.1% of its total 13F portfolio. The second most bullish fund manager is Scopia Capital, led by Matt Sirovich and Jeremy Mindich, holding a $16.8 million position; the fund has 0.4% of its 13F portfolio invested in the stock. Other peers with similar optimism encompass Israel Englander’s Millennium Management, Jerome Pfund and Michael Sjostrom’s Sectoral Asset Management and Steve Cohen’s Point72 Asset Management.
Since Sagent Pharmaceuticals Inc (NASDAQ:SGNT) has witnessed declining sentiment from the smart money, it’s safe to say that there exists a select few hedge funds that slashed their entire stakes heading into Q4. It’s worth mentioning that Soros Fund Management dumped the biggest investment of all the hedgies followed by Insider Monkey, valued at about $8.4 million in stock. Jeffrey Jay and David Kroin’s fund, Great Point Partners, also dumped its stock, about $3.5 million worth of shares. These moves are intriguing to say the least, as aggregate hedge fund interest dropped by 8 funds heading into Q4.
Let’s check out hedge fund activity in other stocks similar to Sagent Pharmaceuticals Inc (NASDAQ:SGNT). These stocks are The Spectranetics Corporation (NASDAQ:SPNC), Kansas City Life Insurance Co (NASDAQ:KCLI), and AAC Holdings Inc (NYSE:AAC). All of these stocks’ market caps are similar to Sagent Pharmaceuticals Inc (NASDAQ:SGNT)’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
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 $77 million. That figure was $63 million in Sagent Pharmaceuticals Inc (NASDAQ:SGNT)’s case. The Spectranetics Corporation (NASDAQ:SPNC) is the most popular stock in this table. On the other hand, Kansas City Life Insurance Co (NASDAQ:KCLI) is the least popular one with only 4 bullish hedge fund positions. Sagent Pharmaceuticals Inc (NASDAQ:SGNT) 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, the Spectranetics Corporation (NASDAQ:SPNC) might be a better candidate to consider a long position.