In this article you are going to find out whether hedge funds think Flexion Therapeutics Inc (NASDAQ:FLXN) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It’s not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.
Is FLXN a good stock to buy now? Prominent investors were in an optimistic mood. The number of bullish hedge fund positions increased by 2 recently. Flexion Therapeutics Inc (NASDAQ:FLXN) was in 17 hedge funds’ portfolios at the end of September. The all time high for this statistic is 16. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that FLXN isn’t among the 30 most popular stocks among hedge funds (click for Q3 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.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to 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 S&P 500 ETFs by more than 66 percentage points since March 2017 (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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks 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. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Now let’s take a glance at the key hedge fund action surrounding Flexion Therapeutics Inc (NASDAQ:FLXN).
Do Hedge Funds Think FLXN Is A Good Stock To Buy Now?
At the end of September, a total of 17 of the hedge funds tracked by Insider Monkey were long this stock, a change of 13% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards FLXN over the last 21 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Miller Value Partners was the largest shareholder of Flexion Therapeutics Inc (NASDAQ:FLXN), with a stake worth $54.9 million reported as of the end of September. Trailing Miller Value Partners was OrbiMed Advisors, which amassed a stake valued at $17.5 million. Clough Capital Partners, Kingdon Capital, and Royce & Associates 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 Miller Value Partners allocated the biggest weight to Flexion Therapeutics Inc (NASDAQ:FLXN), around 1.97% of its 13F portfolio. Kingdon Capital is also relatively very bullish on the stock, designating 1.25 percent of its 13F equity portfolio to FLXN.
Consequently, key money managers have been driving this bullishness. Portolan Capital Management, managed by George McCabe, initiated the largest position in Flexion Therapeutics Inc (NASDAQ:FLXN). Portolan Capital Management had $2.9 million invested in the company at the end of the quarter. Ben Levine, Andrew Manuel and Stefan Renold’s LMR Partners also initiated a $2.3 million position during the quarter. The other funds with new positions in the stock are Israel Englander’s Millennium Management and Mika Toikka’s AlphaCrest Capital Management.
Let’s go over hedge fund activity in other stocks similar to Flexion Therapeutics Inc (NASDAQ:FLXN). These stocks are Globalstar, Inc. (NYSE:GSAT), FuelCell Energy, Inc. (NASDAQ:FCEL), Maxeon Solar Technologies, Ltd. (NASDAQ:MAXN), CarParts.com, Inc. (NASDAQ:PRTS), Great Southern Bancorp, Inc. (NASDAQ:GSBC), NGL Energy Partners LP (NYSE:NGL), and Aprea Therapeutics, Inc. (NASDAQ:APRE). This group of stocks’ market values match FLXN’s market value.
|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 10.4 hedge funds with bullish positions and the average amount invested in these stocks was $58 million. That figure was $122 million in FLXN’s case. CarParts.com, Inc. (NASDAQ:PRTS) is the most popular stock in this table. On the other hand NGL Energy Partners LP (NYSE:NGL) is the least popular one with only 2 bullish hedge fund positions. Flexion Therapeutics Inc (NASDAQ:FLXN) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for FLXN is 74.5. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 30.7% in 2020 through December 14th and still beat the market by 15.8 percentage points. Hedge funds were also right about betting on FLXN, though not to the same extent, as the stock returned 9.2% since Q3 (through December 14th) and outperformed the market as well.
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Disclosure: None. This article was originally published at Insider Monkey.