Is PRTK A Good Stock To Buy Now?

We at Insider Monkey have gone over 817 13F filings that hedge funds and prominent investors are required to file by the SEC The 13F filings show the funds’ and investors’ portfolio positions as of September 30th. In this article, we look at what those funds think of Paratek Pharmaceuticals Inc (NASDAQ:PRTK) based on that data.

Is PRTK a good stock to buy now? Paratek Pharmaceuticals Inc (NASDAQ:PRTK) has experienced a decrease in support from the world’s most elite money managers lately. Paratek Pharmaceuticals Inc (NASDAQ:PRTK) was in 9 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistics is 26. Our calculations also showed that PRTK 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.

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.

Adam Usdan of Trellus 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 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. Keeping this in mind let’s take a look at the recent hedge fund action surrounding Paratek Pharmaceuticals Inc (NASDAQ:PRTK).

Do Hedge Funds Think PRTK Is A Good Stock To Buy Now?

Heading into the fourth quarter of 2020, a total of 9 of the hedge funds tracked by Insider Monkey were long this stock, a change of -25% from the previous quarter. On the other hand, there were a total of 13 hedge funds with a bullish position in PRTK a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Rock Springs Capital Management was the largest shareholder of Paratek Pharmaceuticals Inc (NASDAQ:PRTK), with a stake worth $9.1 million reported as of the end of September. Trailing Rock Springs Capital Management was D E Shaw, which amassed a stake valued at $3.3 million. Renaissance Technologies, Trellus Management Company, and Water Island Capital 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 Trellus Management Company allocated the biggest weight to Paratek Pharmaceuticals Inc (NASDAQ:PRTK), around 1.66% of its 13F portfolio. Rock Springs Capital Management is also relatively very bullish on the stock, setting aside 0.23 percent of its 13F equity portfolio to PRTK.

Because Paratek Pharmaceuticals Inc (NASDAQ:PRTK) has experienced declining sentiment from the entirety of the hedge funds we track, we can see that there was a specific group of money managers who sold off their positions entirely last quarter. Interestingly, Ken Griffin’s Citadel Investment Group sold off the largest position of the 750 funds followed by Insider Monkey, comprising an estimated $0.2 million in stock, and Israel Englander’s Millennium Management was right behind this move, as the fund sold off about $0.1 million worth. These bearish behaviors are interesting, as total hedge fund interest was cut by 3 funds last quarter.

Let’s also examine hedge fund activity in other stocks similar to Paratek Pharmaceuticals Inc (NASDAQ:PRTK). We will take a look at America First Multifamily Investors, L.P. (NASDAQ:ATAX), Rafael Holdings, Inc. (NYSE:RFL), Atlantic Capital Bancshares, Inc. (NASDAQ:ACBI), Tecnoglass Inc. (NASDAQ:TGLS), Cross Country Healthcare, Inc. (NASDAQ:CCRN), The Joint Corp. (NASDAQ:JYNT), and Global Water Resources, Inc. (NASDAQ:GWRS). This group of stocks’ market valuations are closest to PRTK’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ATAX 1 607 -1
RFL 5 27053 0
ACBI 14 35844 0
TGLS 3 6551 -1
CCRN 15 22935 3
JYNT 17 69411 1
GWRS 4 5120 1
Average 8.4 23932 0.4

View table here if you experience formatting issues.

As you can see these stocks had an average of 8.4 hedge funds with bullish positions and the average amount invested in these stocks was $24 million. That figure was $19 million in PRTK’s case. The Joint Corp. (NASDAQ:JYNT) is the most popular stock in this table. On the other hand America First Multifamily Investors, L.P. (NASDAQ:ATAX) is the least popular one with only 1 bullish hedge fund positions. Paratek Pharmaceuticals Inc (NASDAQ:PRTK) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for PRTK is 37.4. 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 32.9% in 2020 through December 8th and still beat the market by 16.2 percentage points. Hedge funds were also right about betting on PRTK as the stock returned 30.1% since the end of Q3 (through 12/8) 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.