Is NEOS A Good Stock To Buy Now?

After several tireless days we have finished crunching the numbers from nearly 817 13F filings issued by the elite hedge funds and other investment firms that we track at Insider Monkey, which disclosed those firms’ equity portfolios as of September 30th. The results of that effort will be put on display in this article, as we share valuable insight into the smart money sentiment towards Neos Therapeutics Inc (NASDAQ:NEOS).

Is NEOS a good stock to buy now? Neos Therapeutics Inc (NASDAQ:NEOS) has experienced a decrease in enthusiasm from smart money recently. Neos Therapeutics Inc (NASDAQ:NEOS) was in 7 hedge funds’ portfolios at the end of September. The all time high for this statistics is 12. Our calculations also showed that NEOS 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.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Tim Lynch of Stonepine Capital

Timothy P. Lynch of Stonepine Capital

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 5 best cheap stocks to buy according to Ray Dalio to identify stocks with upside potential. 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. Keeping this in mind we’re going to review the key hedge fund action surrounding Neos Therapeutics Inc (NASDAQ:NEOS).

What have hedge funds been doing with Neos Therapeutics Inc (NASDAQ:NEOS)?

At the end of the third quarter, a total of 7 of the hedge funds tracked by Insider Monkey were long this stock, a change of -13% from the previous quarter. By comparison, 10 hedge funds held shares or bullish call options in NEOS a year ago. With hedge funds’ sentiment swirling, there exists a select group of key hedge fund managers who were upping their holdings meaningfully (or already accumulated large positions).

The largest stake in Neos Therapeutics Inc (NASDAQ:NEOS) was held by Nantahala Capital Management, which reported holding $2.4 million worth of stock at the end of September. It was followed by Stonepine Capital with a $2.3 million position. Other investors bullish on the company included Renaissance Technologies, Deerfield Management, and Proxima Capital Management. In terms of the portfolio weights assigned to each position Stonepine Capital allocated the biggest weight to Neos Therapeutics Inc (NASDAQ:NEOS), around 2.42% of its 13F portfolio. Proxima Capital Management is also relatively very bullish on the stock, setting aside 0.19 percent of its 13F equity portfolio to NEOS.

Judging by the fact that Neos Therapeutics Inc (NASDAQ:NEOS) has faced bearish sentiment from the smart money, we can see that there were a few fund managers that elected to cut their entire stakes in the third quarter. Intriguingly, Doron Breen and Mori Arkin’s Sphera Global Healthcare Fund dropped the largest position of the 750 funds watched by Insider Monkey, worth an estimated $0.7 million in stock, and Peter Algert and Kevin Coldiron’s Algert Coldiron Investors was right behind this move, as the fund sold off about $0 million worth. These bearish behaviors are interesting, as total hedge fund interest fell by 1 funds in the third quarter.

Let’s now take a look at hedge fund activity in other stocks similar to Neos Therapeutics Inc (NASDAQ:NEOS). These stocks are MV Oil Trust (NYSE:MVO), ARCA biopharma, Inc. (NASDAQ:ABIO), Hexindai Inc. (NASDAQ:HX), Hudson Global Inc (NASDAQ:HSON), Huitao Technology Co., Ltd. (NASDAQ:HHT), Cypress Environmental Partners, L.P. (NYSE:CELP), and Kelso Technologies Inc (NYSE:KIQ). All of these stocks’ market caps are closest to NEOS’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
MVO 1 107 0
ABIO 2 214 1
HX 1 570 -2
HSON 1 947 0
HHT 1 67 0
CELP 1 70 0
KIQ 1 29 0
Average 1.1 286 -0.1

View table here if you experience formatting issues.

As you can see these stocks had an average of 1.1 hedge funds with bullish positions and the average amount invested in these stocks was $0 million. That figure was $6 million in NEOS’s case. ARCA biopharma, Inc. (NASDAQ:ABIO) is the most popular stock in this table. On the other hand MV Oil Trust (NYSE:MVO) is the least popular one with only 1 bullish hedge fund positions. Compared to these stocks Neos Therapeutics Inc (NASDAQ:NEOS) is more popular among hedge funds. Our overall hedge fund sentiment score for NEOS is 71.5. 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 returned 31.6% in 2020 through December 2nd but still managed to beat the market by 16 percentage points. Hedge funds were also right about betting on NEOS as the stock returned 16.8% since the end of September (through 12/2) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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Disclosure: None. This article was originally published at Insider Monkey.