Out of thousands of stocks that are currently traded on the market, it is difficult to identify those that will really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of nearly 817 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has the potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about PLx Pharma Inc. (NASDAQ:PLXP).
PLx Pharma Inc. (NASDAQ:PLXP) shares haven’t seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 3 hedge funds’ portfolios at the end of September. Our calculations also showed that PLXP 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). At the end of this article we will also compare PLXP to other stocks including Cincinnati Bancorp, Inc. (NASDAQ:CNNB), National Holdings Corporation (NASDAQ:NHLD), and Bioline RX Ltd (NASDAQ:BLRX) to get a better sense of its popularity.
Video: Watch our video about the top 5 most popular hedge fund stocks.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. 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 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.
Israel Englander of Millennium Management
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 10 most profitable companies in the world 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. With all of this in mind let’s go over the recent hedge fund action regarding PLx Pharma Inc. (NASDAQ:PLXP).
How have hedgies been trading PLx Pharma Inc. (NASDAQ:PLXP)?
At the end of the third quarter, a total of 3 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards PLXP 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.
Among these funds, Park West Asset Management held the most valuable stake in PLx Pharma Inc. (NASDAQ:PLXP), which was worth $4.8 million at the end of the third quarter. On the second spot was Renaissance Technologies which amassed $0.3 million worth of shares. Millennium Management was 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 Park West Asset Management allocated the biggest weight to PLx Pharma Inc. (NASDAQ:PLXP), around 0.18% of its 13F portfolio. Renaissance Technologies is also relatively very bullish on the stock, designating 0.0003 percent of its 13F equity portfolio to PLXP.
Earlier we told you that the aggregate hedge fund interest in the stock was unchanged and we view this as a negative development. Even though there weren’t any hedge funds dumping their holdings during the third quarter, there weren’t any hedge funds initiating brand new positions. This indicates that hedge funds, at the very best, perceive this stock as dead money and they haven’t identified any viable catalysts that can attract investor attention.
Let’s now review hedge fund activity in other stocks similar to PLx Pharma Inc. (NASDAQ:PLXP). These stocks are Cincinnati Bancorp, Inc. (NASDAQ:CNNB), National Holdings Corporation (NASDAQ:NHLD), Bioline RX Ltd (NASDAQ:BLRX), BioCardia, Inc. (NASDAQ:BCDA), Air T, Inc. (NASDAQ:AIRT), NCS Multistage Holdings, Inc. (NASDAQ:NCSM), and IRIDEX Corporation (NASDAQ:IRIX). All of these stocks’ market caps are similar to PLXP’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CNNB | 1 | 301 | 0 |
| NHLD | 2 | 138 | 0 |
| BLRX | 5 | 3894 | 0 |
| BCDA | 1 | 756 | -1 |
| AIRT | 1 | 1860 | 0 |
| NCSM | 4 | 133 | -2 |
| IRIX | 2 | 1886 | 0 |
| Average | 2.3 | 1281 | -0.4 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 2.3 hedge funds with bullish positions and the average amount invested in these stocks was $1 million. That figure was $5 million in PLXP’s case. Bioline RX Ltd (NASDAQ:BLRX) is the most popular stock in this table. On the other hand Cincinnati Bancorp, Inc. (NASDAQ:CNNB) is the least popular one with only 1 bullish hedge fund positions. PLx Pharma Inc. (NASDAQ:PLXP) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for PLXP is 52.5. 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 28.1% in 2020 through November 23rd and still beat the market by 15.4 percentage points. Hedge funds were also right about betting on PLXP as the stock returned 78.3% since the end of Q3 (through 11/23) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.
