There are several ways to beat the market, and investing in small cap stocks has historically been one of them. We like to improve the odds of beating the market further by examining what famous hedge fund operators such as Carl Icahn and George Soros think. Those hedge fund operators make billions of dollars each year by hiring the best and the brightest to do research on stocks, including small cap stocks that big brokerage houses simply don’t cover. Because of Carl Icahn and other elite funds’ exemplary historical records, we pay attention to their small cap picks. In this article, we use hedge fund filing data to analyze Zogenix, Inc. (NASDAQ:ZGNX).
Is Zogenix, Inc. (NASDAQ:ZGNX) an outstanding investment now? Investors who are in the know are buying. The number of long hedge fund bets inched up by 6 lately. Our calculations also showed that ZGNX 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 the 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 18 percentage points since May 2014 through December 3, 2018 (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.
Let’s check out the fresh hedge fund action surrounding Zogenix, Inc. (NASDAQ:ZGNX).
What have hedge funds been doing with Zogenix, Inc. (NASDAQ:ZGNX)?
At Q3’s end, a total of 37 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 19% from the second quarter of 2018. The graph below displays the number of hedge funds with bullish position in ZGNX over the last 13 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.
Among these funds, Scopia Capital held the most valuable stake in Zogenix, Inc. (NASDAQ:ZGNX), which was worth $263.2 million at the end of the third quarter. On the second spot was Perceptive Advisors which amassed $1.89 billion worth of shares. Moreover, Cadian Capital, RA Capital Management, and Farallon Capital were also bullish on Zogenix, Inc. (NASDAQ:ZGNX), allocating a large percentage of their portfolios to this stock.
With a general bullishness amongst the heavyweights, some big names were leading the bulls’ herd. Cormorant Asset Management, managed by Bihua Chen, initiated the largest position in Zogenix, Inc. (NASDAQ:ZGNX). Cormorant Asset Management had $24.8 million invested in the company at the end of the quarter. Robert Pohly’s Samlyn Capital also made a $15.6 million investment in the stock during the quarter. The following funds were also among the new ZGNX investors: Ken Greenberg and David Kim’s Ghost Tree Capital, and Paul Marshall and Ian Wace’s Marshall Wace LLP.
Let’s now review hedge fund activity in other stocks similar to Zogenix, Inc. (NASDAQ:ZGNX). We will take a look at Amkor Technology, Inc. (NASDAQ:AMKR), Gazit Globe Ltd. (NYSE:GZT), Invesco Mortgage Capital Inc (NYSE:IVR), and Magellan Health Inc (NASDAQ:MGLN). This group of stocks’ market caps are closest to ZGNX’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 13.25 hedge funds with bullish positions and the average amount invested in these stocks was $82 million. That figure was $1.09 billion in ZGNX’s case. Magellan Health Inc (NASDAQ:MGLN) is the most popular stock in this table. On the other hand Gazit Globe Ltd. (NYSE:GZT) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks Zogenix, Inc. (NASDAQ:ZGNX) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.
Disclosure: None. This article was originally published at Insider Monkey.