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.
Is Aratana Therapeutics Inc (NASDAQ:PETX) the right pick for your portfolio? Investors who are in the know are absolutely taking a bullish view. The number of long hedge fund positions grew by 8 in recent months. PETX was in 17 hedge funds’ portfolios at the end of September. There were just 9 hedge funds in our database with PETX holdings at the end of June. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as United Community Financial Corp (NASDAQ:UCFC), Kadmon Holdings Inc (NYSE:KDMN), and Spartan Motors Inc (NASDAQ:SPAR) to gather more data points.
At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.
How are hedge funds trading Aratana Therapeutics Inc (NASDAQ:PETX)?
At the end of the third quarter, a total of 17 of the hedge funds tracked by Insider Monkey were bullish on this stock, an 89% surge from the second quarter of 2016. On the other hand, there were a total of 16 hedge funds with a bullish position in PETX at the beginning of this year, so hedge fund ownership for the year is only up slightly. With hedgies’ capital changing hands, there exists a select group of noteworthy hedge fund managers who were upping their stakes considerably (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, Broadfin Capital, led by Kevin Kotler, holds the number one position in Aratana Therapeutics Inc (NASDAQ:PETX). Broadfin Capital has a $28.9 million position in the stock, comprising 2.6% of its 13F portfolio. The second most bullish fund manager is D E Shaw, one of the biggest hedge funds in the world, which holds a $2.6 million position. Other peers that are bullish consist of Israel Englander’s Millennium Management, Neil Shah’s March Altus Capital Management, and Neil Chriss’ Hutchin Hill Capital. 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.