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Hedge Funds Souring On Fennec Pharmaceuticals Inc. (FENC)

In this article you are going to find out whether hedge funds think Fennec Pharmaceuticals Inc. (NASDAQ:FENC) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. 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.

Fennec Pharmaceuticals Inc. (NASDAQ:FENC) shareholders have witnessed a decrease in enthusiasm from smart money in recent months. Our calculations also showed that FENC isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

If you’d ask most stock holders, hedge funds are perceived as slow, outdated financial vehicles of years past. While there are over 8000 funds with their doors open today, Our experts choose to focus on the bigwigs of this club, around 850 funds. It is estimated that this group of investors direct the lion’s share of the hedge fund industry’s total asset base, and by watching their top investments, Insider Monkey has spotted a number of investment strategies that have historically outrun the market. Insider Monkey’s flagship short hedge fund strategy beat the S&P 500 short ETFs by around 20 percentage points a year since its inception in March 2017. Our portfolio of short stocks lost 36% since February 2017 (through May 18th) even though the market was up 30% during the same period. We just shared a list of 8 short targets in our latest quarterly update .

Donald Sussman Paloma Partners

Donald Sussman of Paloma Partners

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out stocks recommended/scorned by legendary Bill Miller. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind we’re going to review the fresh hedge fund action regarding Fennec Pharmaceuticals Inc. (NASDAQ:FENC).

What have hedge funds been doing with Fennec Pharmaceuticals Inc. (NASDAQ:FENC)?

At the end of the first quarter, a total of 7 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -22% from the previous quarter. The graph below displays the number of hedge funds with bullish position in FENC over the last 18 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is FENC A Good Stock To Buy?

The largest stake in Fennec Pharmaceuticals Inc. (NASDAQ:FENC) was held by Southpoint Capital Advisors, which reported holding $23.7 million worth of stock at the end of September. It was followed by Avoro Capital Advisors (venBio Select Advisor) with a $6.6 million position. Other investors bullish on the company included Solas Capital Management, 683 Capital Partners, and Sonic Capital. In terms of the portfolio weights assigned to each position Solas Capital Management allocated the biggest weight to Fennec Pharmaceuticals Inc. (NASDAQ:FENC), around 6.17% of its 13F portfolio. Sonic Capital is also relatively very bullish on the stock, dishing out 4.3 percent of its 13F equity portfolio to FENC.

Because Fennec Pharmaceuticals Inc. (NASDAQ:FENC) has faced declining sentiment from the entirety of the hedge funds we track, we can see that there is a sect of money managers that slashed their positions entirely by the end of the first quarter. At the top of the heap, Donald Sussman’s Paloma Partners sold off the largest stake of the “upper crust” of funds monitored by Insider Monkey, totaling about $0.1 million in stock, and James A. Silverman’s Opaleye Management was right behind this move, as the fund dropped about $0.1 million worth. These transactions are interesting, as total hedge fund interest was cut by 2 funds by the end of the first quarter.

Let’s go over hedge fund activity in other stocks similar to Fennec Pharmaceuticals Inc. (NASDAQ:FENC). We will take a look at Biglari Holdings Inc (NYSE:BH), Quantum Corporation (NASDAQ:QMCO), CVR Partners LP (NYSE:UAN), and Container Store Group Inc (NYSE:TCS). All of these stocks’ market caps match FENC’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
BH 10 17128 -1
QMCO 10 6267 10
UAN 3 11447 0
TCS 8 4698 -5
Average 7.75 9885 1

View table here if you experience formatting issues.

As you can see these stocks had an average of 7.75 hedge funds with bullish positions and the average amount invested in these stocks was $10 million. That figure was $47 million in FENC’s case. Biglari Holdings Inc (NYSE:BH) is the most popular stock in this table. On the other hand CVR Partners LP (NYSE:UAN) is the least popular one with only 3 bullish hedge fund positions. Fennec Pharmaceuticals Inc. (NASDAQ:FENC) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 13.9% in 2020 through June 10th and still beat the market by 14.2 percentage points. A small number of hedge funds were also right about betting on FENC as the stock returned 34.8% during the second quarter and outperformed the market by an even larger margin.

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