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Hedge Funds Have Never Been This Bullish On EyePoint Pharmaceuticals, Inc. (EYPT)

Is EyePoint Pharmaceuticals, Inc. (NASDAQ:EYPT) a good equity to bet on right now? We like to check what the smart money thinks first before doing extensive research. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It’s not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.

EyePoint Pharmaceuticals, Inc. (NASDAQ:EYPT) shareholders have witnessed an increase in enthusiasm from smart money in recent months. EYPT was in 10 hedge funds’ portfolios at the end of the first quarter of 2019. There were 6 hedge funds in our database with EYPT positions at the end of the previous quarter. Our calculations also showed that EYPT isn’t among the 30 most popular stocks among hedge funds.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. 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 40 percentage points since May 2014 through May 30, 2019 (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.

James Dondero Highland Capital Management

James Dondero of Highland Capital Management

Let’s check out the new hedge fund action encompassing EyePoint Pharmaceuticals, Inc. (NASDAQ:EYPT).

How have hedgies been trading EyePoint Pharmaceuticals, Inc. (NASDAQ:EYPT)?

At Q1’s end, a total of 10 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 67% from the previous quarter. By comparison, 0 hedge funds held shares or bullish call options in EYPT a year ago. With hedgies’ positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were upping their holdings substantially (or already accumulated large positions).

EYPT_june2019

The largest stake in EyePoint Pharmaceuticals, Inc. (NASDAQ:EYPT) was held by Millennium Management, which reported holding $1.7 million worth of stock at the end of March. It was followed by Highland Capital Management with a $1 million position. Other investors bullish on the company included Renaissance Technologies, Granite Point Capital, and Moore Global Investments.

With a general bullishness amongst the heavyweights, key money managers were leading the bulls’ herd. Millennium Management, managed by Israel Englander, created the biggest position in EyePoint Pharmaceuticals, Inc. (NASDAQ:EYPT). Millennium Management had $1.7 million invested in the company at the end of the quarter. Warren Lammert’s Granite Point Capital also initiated a $0.6 million position during the quarter. The other funds with brand new EYPT positions are Louis Bacon’s Moore Global Investments and James E. Flynn’s Deerfield Management.

Let’s now review hedge fund activity in other stocks similar to EyePoint Pharmaceuticals, Inc. (NASDAQ:EYPT). These stocks are AgroFresh Solutions Inc (NASDAQ:AGFS), Information Services Group, Inc. (NASDAQ:III), Nabriva Therapeutics plc (NASDAQ:NBRV), and Ocular Therapeutix Inc (NASDAQ:OCUL). This group of stocks’ market caps resemble EYPT’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
AGFS 5 960 -2
III 6 26451 -1
NBRV 12 39862 0
OCUL 4 17332 0
Average 6.75 21151 -0.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 6.75 hedge funds with bullish positions and the average amount invested in these stocks was $21 million. That figure was $6 million in EYPT’s case. Nabriva Therapeutics plc (NASDAQ:NBRV) is the most popular stock in this table. On the other hand Ocular Therapeutix Inc (NASDAQ:OCUL) is the least popular one with only 4 bullish hedge fund positions. EyePoint Pharmaceuticals, Inc. (NASDAQ:EYPT) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. Unfortunately EYPT wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on EYPT were disappointed as the stock returned -1.1% during the same period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 13 of these stocks already outperformed the market so far in Q2.

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

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