Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed in recent years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets hoping that they will outperform the broader market. Our research shows that certain hedge funds do have great stock picking skills (and we can identify these hedge funds in advance pretty accurately), so let’s take a glance at the smart money sentiment towards Fennec Pharmaceuticals Inc. (NASDAQ:FENC).
Is Fennec Pharmaceuticals Inc. (NASDAQ:FENC) a buy right now? The best stock pickers were reducing their bets on the stock. The number of long hedge fund bets were cut by 1 recently. Fennec Pharmaceuticals Inc. (NASDAQ:FENC) was in 6 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistics is 9. Our calculations also showed that FENC isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks). There were 7 hedge funds in our database with FENC positions at the end of the second quarter.
Video: Watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 66 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 13% through November 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Keeping this in mind we’re going to go over the recent hedge fund action regarding Fennec Pharmaceuticals Inc. (NASDAQ:FENC).
What have hedge funds been doing with Fennec Pharmaceuticals Inc. (NASDAQ:FENC)?
At third quarter’s end, a total of 6 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -14% from the previous quarter. By comparison, 6 hedge funds held shares or bullish call options in FENC a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Southpoint Capital Advisors held the most valuable stake in Fennec Pharmaceuticals Inc. (NASDAQ:FENC), which was worth $24.7 million at the end of the third quarter. On the second spot was Avoro Capital Advisors (venBio Select Advisor) which amassed $10.1 million worth of shares. Sonic Capital, 683 Capital Partners, and Solas Capital Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Sonic Capital allocated the biggest weight to Fennec Pharmaceuticals Inc. (NASDAQ:FENC), around 6.96% of its 13F portfolio. Solas Capital Management is also relatively very bullish on the stock, earmarking 4.64 percent of its 13F equity portfolio to FENC.
Seeing as Fennec Pharmaceuticals Inc. (NASDAQ:FENC) has faced bearish sentiment from the entirety of the hedge funds we track, logic holds that there was a specific group of hedgies that elected to cut their full holdings in the third quarter. Interestingly, James A. Silverman’s Opaleye Management dumped the biggest position of the 750 funds watched by Insider Monkey, worth close to $1.4 million in stock, and Renaissance Technologies was right behind this move, as the fund dropped about $1.1 million worth. These transactions are interesting, as aggregate hedge fund interest was cut by 1 funds in the third quarter.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Fennec Pharmaceuticals Inc. (NASDAQ:FENC) but similarly valued. These stocks are Cherry Hill Mortgage Investment Corp (NYSE:CHMI), AVEO Pharmaceuticals, Inc. (NASDAQ:AVEO), Standard AVB Financial Corp. (NASDAQ:STND), Exicure, Inc. (NASDAQ:XCUR), Culp, Inc. (NYSE:CULP), Galectin Therapeutics Inc. (NASDAQ:GALT), and Matinas Biopharma Holdings, Inc. (NYSE:MTNB). 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|
View table here if you experience formatting issues.
As you can see these stocks had an average of 7.4 hedge funds with bullish positions and the average amount invested in these stocks was $12 million. That figure was $56 million in FENC’s case. Culp, Inc. (NYSE:CULP) is the most popular stock in this table. On the other hand Galectin Therapeutics Inc. (NASDAQ:GALT) is the least popular one with only 2 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 overall hedge fund sentiment score for FENC is 40.7. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 30.7% in 2020 through November 27th and still beat the market by 16.1 percentage points. A small number of hedge funds were also right about betting on FENC as the stock returned 27.7% since the end of the third quarter (through 11/27) and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.