Is Lipocine Inc (LPCN) A Good Stock To Buy?

Investing in hedge funds can bring large profits, but it’s not for everybody, since hedge funds are available only for high-net-worth individuals. They generate significant returns for investors to justify their large fees and they allocate a lot of time and employ a complex analysis to determine the best stocks to invest in. A particularly interesting group of stocks that hedge funds like is the small-caps. The huge amount of capital does not allow hedge funds to invest a lot in small-caps, but our research showed that their most popular small-cap ideas are less efficiently priced and generate stronger returns than their large- and mega-cap picks and the broader market. That is why we follow the hedge fund activity in the small-cap space.

Is Lipocine Inc (NASDAQ:LPCN) a good stock to buy? We will try to answer this question by check out hedge fund activity in the stock. Our calculations show that the stock has experienced a decrease in hedge fund sentiment lately. At the end of this article we will also compare LPCN to other stocks including VSE Corporation (NASDAQ:VSEC), Ivy High Income Opportunities Fund (NYSE:IVH), and vTv Therapeutics Inc (NASDAQ:VTVT) to get a better sense of its popularity.

To most stock holders, hedge funds are viewed as underperforming, outdated investment vehicles of years past. While there are more than 8000 funds in operation at present, Experts at hedge fund tracking site Insider Monkey look at the masters of this group, approximately 700 funds. These hedge fund managers direct most of the smart money’s total capital, and by paying attention to their unrivaled stock picks, Insider Monkey has figured out a number of investment strategies that have historically beaten Mr. Market. Insider Monkey’s small-cap hedge fund strategy outrun the S&P 500 index by 12 percentage points a year for a decade in their back tests.

Now, we’re going to take a look at the key action surrounding Lipocine Inc (NASDAQ:LPCN).

How have hedgies been trading Lipocine Inc (NASDAQ:LPCN)?

At the end of the third quarter, a total of 11 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -8% from the second quarter. With the smart money’s capital changing hands, there exists a select group of noteworthy hedge fund managers who were boosting their holdings substantially.

When looking at the hedgies followed by Insider Monkey, VHCP Management, managed by Anders Hove and Bong Koh, holds the largest position in Lipocine Inc (NASDAQ:LPCN). VHCP Management has a $15 million position in the stock, comprising 3.9% of its 13F portfolio. The second most bullish hedge fund manager is Royce & Associates, managed by Chuck Royce, which held a $12 million position; 0.1% of its 13F portfolio is allocated to the stock. Some other hedgies that hold long positions include Jacob Gottlieb’s Visium Asset Management, Bihua Chen’s Cormorant Asset Management and Mark Kingdon’s Kingdon Capital.

Because Lipocine Inc (NASDAQ:LPCN) has witnessed a declination in interest from the smart money, we can see that there is a sect of hedge funds that decided to sell off their full holdings heading into Q4. At the top of the heap, Steven Boyd’s Armistice Capital said goodbye to the largest position of the “upper crust” of funds tracked by Insider Monkey, worth about $7.3 million in stock. Peter A. Wright’s fund, P.A.W. Capital Partners, also cut its stock, about $0.3 million worth.

Let’s now check out hedge fund activity in other stocks similar to Lipocine Inc (NASDAQ:LPCN). These stocks are VSE Corporation (NASDAQ:VSEC), Ivy High Income Opportunities Fund (NYSE:IVH), vTv Therapeutics Inc (NASDAQ:VTVT), and CAI International Inc (NYSE:CAI). This group of stocks’ market values resemble LPCN’s market value.

As you can see these stocks had an average of 6.5 hedge funds with bullish positions and the average amount invested in these stocks was $5 million. CAI International Inc (NYSE:CAI) is the most popular stock in this table. On the other hand Ivy High Income Opportunities Fund (NYSE:IVH) is the least popular one with only 4 bullish hedge fund positions. Lipocine Inc (NASDAQ:LPCN) is as popular as CAI but, more importantly, hedge funds collectively had more than $57 million invested in the stock. This is more than 8 times the figure invested in CAI. Overall, hedge funds own more than a quarter of LPCN’s outstanding shares. We think investors should seriously research this company and consider adding it to their portfolios.