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Hedge Funds Souring On Pacira Biosciences Inc (PCRX)

In this article you are going to find out whether hedge funds think Pacira Biosciences Inc (NASDAQ:PCRX) 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.

Pacira Biosciences Inc (NASDAQ:PCRX) has experienced a decrease in activity from the world’s largest hedge funds lately. Our calculations also showed that PCRX 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.

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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 58 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

PAULSON & CO

John Paulson of Paulson & Co

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. With all of this in mind we’re going to take a gander at the latest hedge fund action regarding Pacira Biosciences Inc (NASDAQ:PCRX).

What have hedge funds been doing with Pacira Biosciences Inc (NASDAQ:PCRX)?

At Q1’s end, a total of 26 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -7% from the fourth quarter of 2019. The graph below displays the number of hedge funds with bullish position in PCRX over the last 18 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is PCRX A Good Stock To Buy?

When looking at the institutional investors followed by Insider Monkey, Renaissance Technologies,  holds the largest position in Pacira Biosciences Inc (NASDAQ:PCRX). Renaissance Technologies has a $82.8 million position in the stock, comprising 0.1% of its 13F portfolio. Coming in second is Paulson & Co, led by John Paulson, holding a $57.6 million position; the fund has 2.2% of its 13F portfolio invested in the stock. Other professional money managers that are bullish comprise James E. Flynn’s Deerfield Management, D. E. Shaw’s D E Shaw and Kris Jenner, Gordon Bussard, Graham McPhail’s Rock Springs Capital Management. In terms of the portfolio weights assigned to each position Tamarack Capital Management allocated the biggest weight to Pacira Biosciences Inc (NASDAQ:PCRX), around 6.98% of its 13F portfolio. Paulson & Co is also relatively very bullish on the stock, setting aside 2.2 percent of its 13F equity portfolio to PCRX.

Judging by the fact that Pacira Biosciences Inc (NASDAQ:PCRX) has faced a decline in interest from hedge fund managers, we can see that there lies a certain “tier” of hedge funds who sold off their entire stakes in the first quarter. Intriguingly, Tom Sandell’s Sandell Asset Management sold off the biggest stake of the “upper crust” of funds tracked by Insider Monkey, totaling about $6.3 million in stock, and Steve Cohen’s Point72 Asset Management was right behind this move, as the fund sold off about $1.4 million worth. These bearish behaviors are interesting, as total hedge fund interest was cut by 2 funds in the first quarter.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Pacira Biosciences Inc (NASDAQ:PCRX) but similarly valued. We will take a look at Alexander’s, Inc. (NYSE:ALX), Chesapeake Utilities Corporation (NYSE:CPK), KEMET Corporation (NYSE:KEM), and Urban Outfitters, Inc. (NASDAQ:URBN). This group of stocks’ market caps are similar to PCRX’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ALX 8 110151 -5
CPK 7 25946 -1
KEM 18 230546 -3
URBN 23 98855 -11
Average 14 116375 -5

View table here if you experience formatting issues.

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 $116 million. That figure was $369 million in PCRX’s case. Urban Outfitters, Inc. (NASDAQ:URBN) is the most popular stock in this table. On the other hand Chesapeake Utilities Corporation (NYSE:CPK) is the least popular one with only 7 bullish hedge fund positions. Compared to these stocks Pacira Biosciences Inc (NASDAQ:PCRX) is more popular among hedge funds. 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 returned 8.3% in 2020 through the end of May but still managed to beat the market by 13.2 percentage points. Hedge funds were also right about betting on PCRX as the stock returned 31.1% so far in Q2 (through the end of May) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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