At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (see why hell is coming). We reversed our stance on March 25th after seeing unprecedented fiscal and monetary stimulus unleashed by the Fed and the Congress. This is the perfect market for stock pickers, now that the stocks are fully valued again. In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Pacira Biosciences Inc (NASDAQ:PCRX) at the end of the second quarter and determine whether the smart money was really smart about this stock.
Pacira Biosciences Inc (NASDAQ:PCRX) investors should pay attention to an increase in hedge fund interest recently. Pacira Biosciences Inc (NASDAQ:PCRX) was in 29 hedge funds’ portfolios at the end of June. The all time high for this statistics is 31. There were 26 hedge funds in our database with PCRX holdings at the end of March. Our calculations also showed that PCRX isn’t among the 30 most popular stocks among hedge funds (click for Q2 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.
At the moment there are dozens of metrics investors employ to size up their stock investments. Two of the most under-the-radar metrics are hedge fund and insider trading indicators. Our researchers have shown that, historically, those who follow the best picks of the top hedge fund managers can outpace the market by a solid amount (see the details here).
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, this “mom” trader turned $2000 into $2 million within 2 years. So, we are checking out her best trade idea of the month. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We go through lists like the 10 most profitable companies in the world 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. Now let’s go over the recent hedge fund action surrounding Pacira Biosciences Inc (NASDAQ:PCRX).
How are hedge funds trading Pacira Biosciences Inc (NASDAQ:PCRX)?
At Q2’s end, a total of 29 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 12% from the previous quarter. The graph below displays the number of hedge funds with bullish position in PCRX over the last 20 quarters. With hedgies’ sentiment swirling, there exists a select group of noteworthy hedge fund managers who were adding to their stakes significantly (or already accumulated large positions).
Among these funds, Renaissance Technologies held the most valuable stake in Pacira Biosciences Inc (NASDAQ:PCRX), which was worth $149.6 million at the end of the third quarter. On the second spot was Deerfield Management which amassed $87.3 million worth of shares. Paulson & Co, D E Shaw, and Rock Springs 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 Tamarack Capital Management allocated the biggest weight to Pacira Biosciences Inc (NASDAQ:PCRX), around 10.23% of its 13F portfolio. Deerfield Management is also relatively very bullish on the stock, setting aside 2.54 percent of its 13F equity portfolio to PCRX.
Now, key money managers were leading the bulls’ herd. Eversept Partners, managed by Kamran Moghtaderi, assembled the biggest position in Pacira Biosciences Inc (NASDAQ:PCRX). Eversept Partners had $7 million invested in the company at the end of the quarter. Lawrence Hawkins’s Prosight Capital also initiated a $2.9 million position during the quarter. The following funds were also among the new PCRX investors: Joe DiMenna’s ZWEIG DIMENNA PARTNERS, Minhua Zhang’s Weld Capital Management, and Jerome Pfund and Michael Sjostrom’s Sectoral Asset Management.
Let’s now take a look at hedge fund activity in other stocks similar to Pacira Biosciences Inc (NASDAQ:PCRX). These stocks are Vishay Intertechnology, Inc. (NYSE:VSH), Sensient Technologies Corporation (NYSE:SXT), LGI Homes Inc (NASDAQ:LGIH), ESCO Technologies Inc. (NYSE:ESE), Cleveland-Cliffs Inc (NYSE:CLF), Progyny, Inc. (NASDAQ:PGNY), and Primo Water Corporation (NYSE:PRMW). This group of stocks’ market values match PCRX’s market value.
|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 22.1 hedge funds with bullish positions and the average amount invested in these stocks was $219 million. That figure was $553 million in PCRX’s case. Primo Water Corporation (NYSE:PRMW) is the most popular stock in this table. On the other hand ESCO Technologies Inc. (NYSE:ESE) is the least popular one with only 7 bullish hedge fund positions. Pacira Biosciences Inc (NASDAQ:PCRX) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for PCRX is 81.9. 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 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 23.8% in 2020 through September 14th and still beat the market by 17.6 percentage points. Hedge funds were also right about betting on PCRX as the stock returned 11% during Q3 (through September 14th) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.