Hedge fund managers like David Einhorn, Dan Loeb, or Carl Icahn became billionaires through reaping large profits for their investors, which is why piggybacking their stock picks may provide us with significant returns as well. Many hedge funds, like Paul Singer’s Elliott Management, are pretty secretive, but we can still get some insights by analyzing their quarterly 13F filings. One of the most fertile grounds for large abnormal returns is hedge funds’ most popular small-cap picks, which are not so widely followed and often trade at a discount to their intrinsic value. In this article we will check out hedge fund activity in another small-cap stock: ProNAi Therapeutics Inc (NASDAQ:DNAI).
ProNAi Therapeutics Inc (NASDAQ:DNAI) investors should be aware of a decrease in support from the world’s most successful money managers of late. There were 9 hedge funds in our database with DNAI holdings at the end of the previous quarter. At the end of this article we will also compare DNAI to other stocks including CytRx Corporation (NASDAQ:CYTR), VAALCO Energy, Inc. (NYSE:EGY), and Christopher & Banks Corporation (NYSE:CBK) to get a better sense of its popularity.
We follow over 700 hedge funds and other institutional investors and by analyzing their quarterly 13F filings, we identify stocks that they are collectively bullish on and develop investment strategies based on this data. One strategy that outperformed the market over the last year involves selecting the 100 best-performing funds and identifying the 30 mid-cap stocks that they are collectively most bullish on. Over the past year, this strategy generated returns of 18%, topping the 8% gain registered by S&P 500 ETFs. We launched this strategy 2.5 years ago and it returned more than 39% since then, vs. 22% gain registered by the S&P 500 ETFs.
Now, we’re going to take a gander at the key action encompassing ProNAi Therapeutics Inc (NASDAQ:DNAI).
What does the smart money think about ProNAi Therapeutics Inc (NASDAQ:DNAI)?
At the end of the third quarter, a total of 8 of the hedge funds tracked by Insider Monkey were long this stock, a drop of 11% from the second quarter of 2016. The graph below displays the number of hedge funds with bullish position in DNAI over the last 5 quarters. With the smart money’s capital changing hands, there exists a select group of noteworthy hedge fund managers who were upping their holdings considerably (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Frazier Healthcare Partners, led by Alan Frazier, holds the most valuable position in ProNAi Therapeutics Inc (NASDAQ:DNAI). According to regulatory filings, the fund has a $4 million position in the stock, comprising 2% of its 13F portfolio. Sitting at the No. 2 spot is Deerfield Management, led by James E. Flynn, holding a $2.5 million position; 0.1% of its 13F portfolio is allocated to the stock. Other professional money managers that hold long positions consist of Hal Mintz’s Sabby Capital, Renaissance Technologies, one of the largest hedge funds in the world, and Jerome Pfund and Michael Sjostrom’s Sectoral Asset Management. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.
Judging by the fact that ProNAi Therapeutics Inc (NASDAQ:DNAI) has weathered declining sentiment from the aggregate hedge fund industry, it’s safe to say that there is a sect of money managers who were dropping their entire stakes last quarter. At the top of the heap, Daniel Gold’s QVT Financial cashed in the largest investment of all the hedgies monitored by Insider Monkey, worth close to $0.1 million in stock, and Israel Englander’s Millennium Management was right behind this move, as the fund sold off about $0.1 million worth of shares.
Let’s also examine hedge fund activity in other stocks similar to ProNAi Therapeutics Inc (NASDAQ:DNAI). These stocks are CytRx Corporation (NASDAQ:CYTR), VAALCO Energy, Inc. (NYSE:EGY), Christopher & Banks Corporation (NYSE:CBK), and ParkerVision, Inc. (NASDAQ:PRKR). This group of stocks’ market values are closest to DNAI’s market value.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
As you can see these stocks had an average of 6 hedge funds with bullish positions and the average amount invested in these stocks was $4 million. That figure was $9 million in DNAI’s case. VAALCO Energy, Inc. (NYSE:EGY) is the most popular stock in this table. On the other hand ParkerVision, Inc. (NASDAQ:PRKR) is the least popular one with only 4 bullish hedge fund positions. ProNAi Therapeutics Inc (NASDAQ:DNAI) 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 piling on. In this regard EGY might be a better candidate to consider taking a long position in.