The Insider Monkey team has completed processing the quarterly 13F filings for the September quarter submitted by the hedge funds and other money managers included in our extensive database. Most hedge fund investors experienced strong gains on the back of a strong market performance, which certainly propelled them to adjust their equity holdings so as to maintain the desired risk profile. As a result, the relevancy of these public filings and their content is indisputable, as they may reveal numerous high-potential stocks. The following article will discuss the smart money sentiment towards Zynerba Pharmaceuticals Inc (NASDAQ:ZYNE).
Is Zynerba Pharmaceuticals (ZYNE) a good stock to buy now? ZYNE investors should be aware of a decrease in hedge fund interest recently. Zynerba Pharmaceuticals Inc (NASDAQ:ZYNE) was in 7 hedge funds’ portfolios at the end of September. The all time high for this statistics is 12. There were 12 hedge funds in our database with ZYNE positions at the end of the second quarter. Our calculations also showed that ZYNE 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.
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 we’re going to review the new hedge fund action encompassing Zynerba Pharmaceuticals Inc (NASDAQ:ZYNE).
How have hedgies been trading Zynerba Pharmaceuticals Inc (NASDAQ:ZYNE)?
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 -42% from the previous quarter. By comparison, 4 hedge funds held shares or bullish call options in ZYNE a year ago. With the smart money’s positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were boosting their holdings significantly (or already accumulated large positions).
The largest stake in Zynerba Pharmaceuticals Inc (NASDAQ:ZYNE) was held by Prentice Capital Management, which reported holding $1.3 million worth of stock at the end of September. It was followed by Millennium Management with a $0.7 million position. Other investors bullish on the company included OZ Management, Citadel Investment Group, and Algert Coldiron Investors. In terms of the portfolio weights assigned to each position Prentice Capital Management allocated the biggest weight to Zynerba Pharmaceuticals Inc (NASDAQ:ZYNE), around 0.49% of its 13F portfolio. Algert Coldiron Investors is also relatively very bullish on the stock, designating 0.05 percent of its 13F equity portfolio to ZYNE.
Because Zynerba Pharmaceuticals Inc (NASDAQ:ZYNE) has faced a decline in interest from the aggregate hedge fund industry, it’s easy to see that there is a sect of hedge funds that decided to sell off their full holdings in the third quarter. Intriguingly, Neil Shahrestani’s Ikarian Capital dropped the biggest position of the “upper crust” of funds tracked by Insider Monkey, worth an estimated $2.2 million in stock, and Michael Gelband’s ExodusPoint Capital was right behind this move, as the fund dropped about $0.6 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest fell by 5 funds in the third quarter.
Let’s now review hedge fund activity in other stocks similar to Zynerba Pharmaceuticals Inc (NASDAQ:ZYNE). These stocks are Bellerophon Therapeutics, Inc. (NASDAQ:BLPH), CVR Partners LP (NYSE:UAN), O2Micro International Limited (NASDAQ:OIIM), Park City Group, Inc. (NASDAQ:PCYG), Senseonics Holdings, Inc. (NYSE:SENS), EMCORE Corporation (NASDAQ:EMKR), and Tarena International Inc (NASDAQ:TEDU). This group of stocks’ market valuations are closest to ZYNE’s market valuation.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
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As you can see these stocks had an average of 4.9 hedge funds with bullish positions and the average amount invested in these stocks was $10 million. That figure was $3 million in ZYNE’s case. EMCORE Corporation (NASDAQ:EMKR) is the most popular stock in this table. On the other hand CVR Partners LP (NYSE:UAN) is the least popular one with only 2 bullish hedge fund positions. Zynerba Pharmaceuticals Inc (NASDAQ:ZYNE) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for ZYNE is 42.5. 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 31.6% in 2020 through December 2nd and still beat the market by 16 percentage points. Hedge funds were also right about betting on ZYNE as the stock returned 35.6% since the end of Q3 (through 12/2) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.