On Monday, MediciNova, Inc. (NASDAQ:MNOV)‘s stock ranked among the top gained, jumping by 22% morning trading and then retracting to 15%, after the company said that it had received the approval of a second protocol for a clinical trial. The protocol will evaluate MN-001 (tielukast) for a Nonalcoholic steatohepatitis (NASH) indication and assess if the drug is capable of improving cardiovascular risk. However, Medicinova is a nano-cap company, with a market capitalization of only $88 million, therefore its stock is characterized by a high volatility.
MediciNova, Inc. (NASDAQ:MNOV) is engaged in the biopharmaceutical segment and focuses on acquiring and developing small molecule therapeutics for the treatment of serious diseases with unmet medical needs. The company will commence a Phase 2 trial that will evaluate the efficacy, safety, and tolerability of MN-001, according to a statement. Last week, MediciNova said that it was in late-stage discussions with investigators at Penn State University regarding the Phase 2 study of MN-001 for the treatment of moderate to severe idiopathic pulmonary fibrosis (IPF).
The stock of MediciNova, Inc. (NASDAQ:MNOV) is up by almost 80% for the last year, as the company has been riding the biotech wave alongside its industry peers. The increase of the stock comes amid the company not reporting any revenues for the last several quarters and posting a net loss of around $0.10 every quarter. However, the latest performance of the majority of biotech stocks shows that it is not surprising for a small company with weak financial results to gain ground lately. Moreover, the stock is still down by 67% since it became public in 2006.
However, the result of the stock gaining ground is not due to a bullish sentiment from the smart money. In fact, out of over 700 funds from our database, the only shareholder of MediciNova, Inc. (NASDAQ:MNOV) is Jim Simons‘ Renaissance Technologies. As of the end of March, Renaissance owns 110,800 shares of the company, down by 5% on the quarter, with an aggregate value of $388,000. In addition, the company has not witnessed any significant insider transactions lately.
Why do we think that it is important to follow the hedge fund sentiment surrounding a stock? We pay attention to hedge funds’ moves because our research has shown that hedge funds are extremely talented at picking stocks on the long side of their portfolios. It is true that hedge fund investors have been underperforming the market in recent years. However, this was mainly because hedge funds’ short stock picks lost a ton of money during the bull market that started in March 2009. Hedge fund investors also paid an arm and a leg for the services that they received. We have been tracking the performance of hedge funds’ 15 most popular stock picks in real time since the end of August 2012. These stocks have returned 135% since then and outperformed the S&P 500 Index by around 80 percentage points (see the details here). That’s why we believe it is important to pay attention to hedge fund sentiment; we also don’t like paying huge fees.