Billionaire hedge fund managers such as Steve Cohen and Stan Druckenmiller can generate millions or even billions of dollars every year by pinning down high-potential small-cap stocks and pouring cash into these candidates. Small-cap stocks are overlooked by most investors, brokerage houses, and financial services hubs, while the unlimited research abilities of the big players within the hedge fund industry can easily identify the undervalued and high-potential stocks that reside the ignored corners of equity markets. There are numerous small-cap stocks that have turned out to be great winners, which is one of the main reasons the Insider Monkey team pays close attention to the hedge fund activity in relation to these stocks.
Pernix Therapeutics Holdings Inc (NASDAQ:PTX) shareholders have witnessed a decrease in hedge fund interest recently. There were 10 hedge funds in our database with PTX positions at the end of the second quarter, which fell by 4 during the third quarter. At the end of this article we will also compare PTX to other stocks including Hudson Global Inc (NASDAQ:HSON), Concurrent Computer Corp (NASDAQ:CCUR), and Lincoln Educational Services Corporation (NASDAQ:LINC) to get a better sense of its popularity.
We care about hedge fund sentiment because historically hedge funds’ stock picks delivered strong risk adjusted returns. There are certain segments of the market where hedge funds’ stock picks performed much better than its benchmarks. For instance, the 30 most popular mid-cap stocks among the best performing hedge funds returned 18% over the last 12 months outpacing S&P 500 Index by more than 10 percentage points. We developed this strategy 2.5 years ago and started sharing its picks in our quarterly newsletter. It bested the S&P 500 Index ETFs by delivering a solid 39% vs. 22% gain for its benchmarks.
How have hedgies been trading Pernix Therapeutics Holdings Inc (NASDAQ:PTX)?
At Q3’s end, a total of 6 of the hedge funds tracked by Insider Monkey were bullish on this stock, a 40% fall from the previous quarter. On the other hand, there were a total of 17 hedge funds with a bullish position in PTX a year earlier, so hedge fund sentiment has fallen significantly. So, let’s find out which hedge funds remain among the top holders of the stock and which hedge funds were making big moves.
According to Insider Monkey’s hedge fund database, Broadfin Capital, led by Kevin Kotler, holds the most valuable position in Pernix Therapeutics Holdings Inc (NASDAQ:PTX). Broadfin Capital has a $4.3 million position in the stock. The second most bullish fund manager is Renaissance Technologies, one of the largest hedge funds in the world, which holds a $3 million position. Other peers with similar optimism comprise Dennis Purcell’s Aisling Capital, Samuel Isaly’s OrbiMed Advisors, and Ken Griffin’s Citadel Investment Group. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds, which is based on the performance of their 13F long positions in non-micro-cap stocks.
We already know that not all hedge funds are bullish on the stock and some hedge funds actually sold off their positions entirely. Interestingly, Cliff Asness’ AQR Capital Management sold off the biggest stake of the 700 funds tracked by Insider Monkey, valued at an estimated $0.6 million in stock. Paul Tudor Jones’ fund, Tudor Investment Corp, also dumped its stock, about $0.1 million worth.
Let’s now review hedge fund activity in other stocks similar to Pernix Therapeutics Holdings Inc (NASDAQ:PTX). We will take a look at Hudson Global Inc (NASDAQ:HSON), Concurrent Computer Corp (NASDAQ:CCUR), Lincoln Educational Services Corporation (NASDAQ:LINC), and MGT Capital Investments Inc. (OTCMKTS:MGT). This group of stocks’ market valuations are similar to PTX’s market valuation.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
As you can see these stocks had an average of 4 hedge funds with bullish positions and the average amount invested in these stocks was $6 million. That figure was $9 million in PTX’s case. Hudson Global Inc (NASDAQ:HSON) is the most popular stock in this table. On the other hand Concurrent Computer Corp (NASDAQ:CCUR) is the least popular one with only 3 bullish hedge fund positions. Compared to these stocks Pernix Therapeutics Holdings Inc (NASDAQ:PTX) 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, bearing in mind that hedge fund sentiment continues to fall.