The market has been volatile in the last few months as the Federal Reserve finalized its rate cuts and uncertainty looms over trade negotiations with China. Small cap stocks have been hit hard as a result, as the Russell 2000 ETF (IWM) has underperformed the larger S&P 500 ETF (SPY) by more than 10 percentage points over the last 12 months. SEC filings and hedge fund investor letters indicate that the smart money seems to be paring back their overall long exposure since summer months, though some funds increased their exposure dramatically at the end of Q3 and the beginning of Q4. In this article, we analyze what the smart money thinks of Sunesis Pharmaceuticals, Inc. (NASDAQ:SNSS) and find out how it is affected by hedge funds’ moves.
Is Sunesis Pharmaceuticals, Inc. (NASDAQ:SNSS) a buy right now? Prominent investors are taking an optimistic view. The number of bullish hedge fund positions improved by 1 recently. Our calculations also showed that SNSS isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to 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 hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (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 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Steven Cohen of Point72 Asset Management
We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius’ weekly trade ideas. This December we recommended Adams Energy based on an under-the-radar fund manager’s investor letter and the stock gained 20 percent. Let’s take a look at the new hedge fund action surrounding Sunesis Pharmaceuticals, Inc. (NASDAQ:SNSS).
What have hedge funds been doing with Sunesis Pharmaceuticals, Inc. (NASDAQ:SNSS)?
At Q3’s end, a total of 12 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 9% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards SNSS over the last 17 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
When looking at the institutional investors followed by Insider Monkey, Wilmot B. Harkey and Daniel Mack’s Nantahala Capital Management has the number one position in Sunesis Pharmaceuticals, Inc. (NASDAQ:SNSS), worth close to $5.5 million, comprising 0.2% of its total 13F portfolio. Coming in second is Biotechnology Value Fund, managed by Mark Lampert, which holds a $4.5 million position; the fund has 0.5% of its 13F portfolio invested in the stock. Other peers with similar optimism encompass Srini Akkaraju and Michael Dybbs’s Samsara BioCapital, Steve Cohen’s Point72 Asset Management and William Leland Edwards’s Palo Alto Investors. In terms of the portfolio weights assigned to each position Samsara BioCapital allocated the biggest weight to Sunesis Pharmaceuticals, Inc. (NASDAQ:SNSS), around 1.77% of its 13F portfolio. Biotechnology Value Fund is also relatively very bullish on the stock, setting aside 0.47 percent of its 13F equity portfolio to SNSS.
Now, key hedge funds were breaking ground themselves. DAFNA Capital Management, managed by Nathan Fischel, created the most outsized position in Sunesis Pharmaceuticals, Inc. (NASDAQ:SNSS). DAFNA Capital Management had $0.7 million invested in the company at the end of the quarter. Israel Englander’s Millennium Management also made a $0.3 million investment in the stock during the quarter. The only other fund with a new position in the stock is Efrem Kamen’s Pura Vida Investments.
Let’s now take a look at hedge fund activity in other stocks similar to Sunesis Pharmaceuticals, Inc. (NASDAQ:SNSS). These stocks are Intellicheck, Inc. (NYSE:IDN), Veritone, Inc. (NASDAQ:VERI), Innovative Solutions and Support Inc (NASDAQ:ISSC), and Jupai Holdings Limited (NYSE:JP). This group of stocks’ market valuations match SNSS’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| IDN | 1 | 192 | 0 |
| VERI | 2 | 413 | -2 |
| ISSC | 3 | 3048 | 0 |
| JP | 4 | 278 | 3 |
| Average | 2.5 | 983 | 0.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 2.5 hedge funds with bullish positions and the average amount invested in these stocks was $1 million. That figure was $17 million in SNSS’s case. Jupai Holdings Limited (NYSE:JP) is the most popular stock in this table. On the other hand Intellicheck, Inc. (NYSE:IDN) is the least popular one with only 1 bullish hedge fund positions. Compared to these stocks Sunesis Pharmaceuticals, Inc. (NASDAQ:SNSS) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately SNSS wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on SNSS were disappointed as the stock returned -40.3% during the first two months of the fourth quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 70 percent of these stocks already outperformed the market in Q4.
Disclosure: None. This article was originally published at Insider Monkey.
