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Is Aratana Therapeutics Inc (PETX) A Worthy Healthcare Investment?

Is Aratana Therapeutics Inc (NASDAQ:PETX) a good stock to buy right now? We at Insider Monkey like to examine what billionaires and hedge funds think of a company before doing days of research on it. Given their 2-and-20 payment structure, hedge funds have more resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also have numerous Ivy League graduates and MBAs on their staffs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.

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Aratana Therapeutics Inc (NASDAQ:PETX) was in 13 hedge funds’ portfolios at the end of the third quarter of 2015. The aggregate number of positions was unchanged, as there were 13 hedge funds in our database with Aratana Therapeutics Inc (NASDAQ:PETX) holdings at the end of the previous quarter. At the end of this article we will also compare Aratana Therapeutics Inc (NASDAQ:PETX) to other stocks including AR Capital Acquisition Corp (NASDAQ:AUMA), Destination XL Group Inc (NASDAQ:DXLG), and Angie’s List Inc (NASDAQ:ANGI) to get a better sense of its popularity.

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According to most traders, hedge funds are perceived as slow, outdated financial vehicles of the past. While there are over 8,000 funds in operation today, our researchers hone in on the upper echelon of this club, around 700 funds. These investment experts have their hands on most of all hedge funds’ total asset base, and by paying attention to their matchless equity investments, Insider Monkey has uncovered several investment strategies that have historically defeated Mr. Market. Insider Monkey’s small-cap hedge fund strategy surpassed the S&P 500 index by 12 percentage points per year for a decade in its backtests.

Keeping this in mind, we’re going to analyze the latest action surrounding Aratana Therapeutics Inc (NASDAQ:PETX).

How are hedge funds trading Aratana Therapeutics Inc (NASDAQ:PETX)?

At the end of Q3, a total of 13 of the hedge funds tracked by Insider Monkey held long positions in this stock, flat compared to the previous quarter. With hedge funds’ positions undergoing their usual ebb and flow, there exists an “upper tier” of noteworthy hedge fund managers who were increasing their stakes significantly (or already accumulated large positions).

Of the funds tracked by Insider Monkey, Broadfin Capital, managed by Kevin Kotler, holds the number one position in Aratana Therapeutics Inc (NASDAQ:PETX). Broadfin Capital has an $11.1 million position in the stock, comprising 0.6% of its 13F portfolio. Coming in second is Clifford Fox of Columbus Circle Investors, with an $8.5 million position; the investor’s fund has 0.1% of its 13F portfolio invested in the stock. Some other hedge funds with similar optimism contain Phill Gross and Robert Atchinson’s Adage Capital Management, Anand Parekh’s Alyeska Investment Group, and Kris Jenner, Gordon Bussard, Graham McPhail’s Rock Springs Capital Management.

Since Aratana Therapeutics Inc (NASDAQ:PETX) has experienced flat overall interest from the aggregate hedge fund industry, there is also a sect of hedgies that elected to cut their entire stakes in the third quarter. Intriguingly, Stuart Weisbrod’s Iguana Healthcare Management dropped the largest investment of all the hedgies monitored by Insider Monkey, valued at close to $3 million in stock. D E Shaw also said goodbye to its stock, about $0.8 million worth. These moves are interesting, as total hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s now take a look at hedge fund activity in other stocks similar to Aratana Therapeutics Inc (NASDAQ:PETX). We will take a look at AR Capital Acquisition Corp (NASDAQ:AUMA), Destination XL Group Inc (NASDAQ:DXLG), Angie’s List Inc (NASDAQ:ANGI), and Reading International, Inc. (NASDAQ:RDI). This group of stocks’ market caps are closest to Aratana Therapeutics Inc (NASDAQ:PETX)’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
AUMA 13 164013 0
DXLG 13 115270 0
ANGI 11 53465 -3
RDI 11 17327 2

As you can see these stocks had an average of 12 hedge funds with bullish positions and the average amount invested in these stocks was $88 million. That figure was $43 million in Aratana Therapeutics Inc (NASDAQ:PETX)’s case. AR Capital Acquisition Corp (NASDAQ:AUMA) is the most popular stock in this table. On the other hand, Angie’s List Inc (NASDAQ:ANGI) is the least popular one with only 11 bullish hedge fund positions. Aratana Therapeutics Inc (NASDAQ:PETX) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are putting a lot of money into. We don’t see substantial hedge fund interest in the stock, so we will keep looking for better alternatives.

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