Most Popular Healthcare Stocks Under $5

Most securities that cost less than a dinner at a fast-food restaurant are considered to be too risky, with most intra-day traders or other investors usually avoiding these low-priced stocks. While securities with price tags below $5 may be riskier, retail investors fearing these lower-priced stocks should keep in mind that Apple Inc. (NASDAQ:AAPL), Ford Motor Company (NYSE:F) and other companies once traded below the $5 price level as well. It is also true that most stocks that trade below $5 have little analyst coverage, which may enable the hedge fund industry to identify high-potential investment opportunities by leveraging their highly-skilled research teams. That’s why Insider Monkey decided to compile a list of the five most popular healthcare stocks under $5 within the hedge fund industry. Hedge fund sentiment may point to healthcare stocks that look poised to possibly trade higher from current price levels in the future, though one should not forget the risk associated with such securities.

Through extensive research, we determined that imitating some of the picks of hedge funds and other institutional investors can help generate market-beating returns over the long run. The key is to focus on the small-cap picks of these investors, since they are usually less followed by the broader market and are less price-efficient. Our backtests that covered the period between 1999 and 2012, showed that following the 15 most popular small-caps among hedge funds can help a retail investor beat the market by an average of 95 basis points per month (see more details here).

#5. QLT Inc. (USA) (NASDAQ:QLTI)

 – Investors with long positions (as of March 31): 17

 – Aggregate value of investors’ holdings (as of March 31): $39.78 Million

There were 17 hedge funds tracked by Insider Monkey with long positions in QLT Inc. (USA) (NASDAQ:QLTI) at the end of the first quarter, compared with 19 funds registered at the end of 2015. Similarly, the overall value of those positions shrank to $39.78 million from $56.88 million quarter-over-quarter. It should be noted that the 17 money managers had accumulated nearly 38% of QLT’s outstanding common stock as of March 31. The biotechnology company focused on developing innovative ocular products has seen its shares drop by 43% since the beginning of 2016. QLT does not generate revenue from product sales just yet, with its core operations currently focused on clinical development programs related to the company’s synthetic retinoid for the treatment of certain age-related and inherited retinal diseases. QLT’s research and development expenditures for the first quarter were $3.0 million, up from $2.2 million recorded a year earlier. Kevin Kotler’s Broadfin Capital owns 4.45 million shares of QLT Inc. (USA) (NASDAQ:QLTI) as of the end of the first quarter.

#4. Rigel Pharmaceuticals Inc. (NASDAQ:RIGL)

 – Investors with long positions (as of March 31): 18

 – Aggregate value of investors’ holdings (as of March 31): $45.46 Million

The number of asset managers followed by Insider Monkey with stakes in Rigel Pharmaceuticals Inc. (NASDAQ:RIGL) remained unchanged during the first three months of 2016 at 18. In the meantime, the dollar value those stakes declined to $45.46 million from $59.97 million during the quarter, with roughly 24% of the company’s outstanding shares being stockpiled by the 18 hedge fund vehicles from our extensive database. The clinical-stage biotechnology company that focuses on discovering drugs in the therapeutic areas of immunology, oncology and immuno-oncology has seen its market value decline by 17% thus far in 2016. The company’s ongoing clinical programs comprise fostamatinib, which is being studied in a Phase 3 clinical trial for immune thrombocytopenic purpura, a Phase 2 clinical trial for autoimmune hemolytic anemia, as well as a Phase 2 clinical trial for IgA nephropathy. James E. Flynn’s Deerfield Management had 2.40 million shares of Rigel Pharmaceuticals Inc. (NASDAQ:RIGL) in its equity portfolio at the end of March.

The top three cheap healthcare stocks favored by top hedge funds are uncovered on the next page.

#3. BioCryst Pharmaceuticals Inc. (NASDAQ:BCRX)

 – Investors with long positions (as of March 31): 18

 – Aggregate value of investors’ holdings (as of March 31): $73.02 Million

BioCryst Pharmaceuticals Inc. (NASDAQ:BCRX) received some love during the first quarter from the elite segment of the hedge fund industry monitored by Insider Monkey, as the number of funds in our system with stakes in BioCryst rose to 18 from 15 during the March quarter. Nevertheless, the aggregate value of those stakes plummeted to $73.02 million from $239.89 million, though the 18 asset managers still held 35% of the company’s outstanding shares. The shares of the biotechnology company developing small molecule drugs that block key enzymes involved in the pathogenesis of diseases are 66% in the red year-to-date, mainly owing to disastrous results from the company’s OPuS-2 trial of orally-administered avoralstat for the treatment of hereditary angioedema (HAE) attacks. On the other hand, BioCryst revealed in early March that its experimental antiviral drug BCX4430 improved survival rates in mice infected with Zika virus in a preclinical study. Baker Bros. Advisors, run by Julian Baker and Felix Baker, upped its stake in BioCryst Pharmaceuticals Inc. (NASDAQ:BCRX) by 6% during the first quarter, to 15.01 million shares.

#2. Array Biopharma Inc. (NASDAQ:ARRY)

 – Investors with long positions (as of March 31): 20

 – Aggregate value of investors’ holdings (as of March 31): $187.58 Million

Array Biopharma Inc. (NASDAQ:ARRY) somewhat fell out of favor with the hedge funds tracked by our team in the first quarter, with the number of money managers invested in the company dropping to 20 from 23 quarter-over-quarter. Correspondingly, the aggregate value of those money managers’ equity investments in Array Biopharma fell to $187.58 million from $265.03 million, though those 20 investment firms with positions in Array still hoarded 44% of the company’s shares. In early April, the biopharmaceutical company focused on the development of targeted small molecule drugs for the treatment of various forms of cancer announced its decision to abandon a Phase 3 trial of binimetinib for the treatment of patients suffering ovarian cancer, after an interim analysis revealed that the trial would fail. Binimetinib, which is also being studied as a possible treatment for patients afflicted with skin cancer, is one of three cancer drugs currently being studied and developed by Array Biopharma. Array shares are 8% in the red year-to-date. Samuel Isaly’s OrbiMed Advisors reported owning 10.69 million shares of Array Biopharma Inc. (NASDAQ:ARRY) in its latest 13F filing.

#1. Synergy Pharmaceuticals Inc. (NASDAQ:SGYP)

 – Investors with long positions (as of March 31): 21

 – Aggregate value of investors’ holdings (as of March 31): $73.66 Million

The smart money sentiment towards Synergy Pharmaceuticals Inc. (NASDAQ:SGYP) declined during the first three months of 2016, as the number of funds invested in the company fell to 21 from 24 quarter-over-quarter, while the value of those funds’ equity investments in Synergy shrank to $73.66 million from $143.82 million, mainly owing to a 51% decline in the share price of the company’s stock during the quarter. Approximately 24% of Synergy’s outstanding shares resided in the equity portfolios of the 21 asset managers in our database which were long the stock. The biopharmaceutical company’s drug candidate plecanatide is under FDA review as a possible treatment for chronic idiopathic constipation (CIC), after the company filed its first new drug application (NDA) in late January. While the FDA’s decision is anticipated to be announced in late January 2017, Synergy Pharmaceuticals anticipates filing its second NDA for plecanatide, for the treatment of irritable bowel syndrome with constipation (IBS-C), by the end of 2016. Steven Boyd’s Armistice Capital acquired a new stake of 2.20 million shares of Synergy Pharmaceuticals Inc. (NASDAQ:SGYP) during the first quarter of 2016.

Disclosure: None