Hedge funds are not perfect. They have their bad picks just like everyone else. Facebook, a stock hedge funds have loved dearly, lost nearly 40% of its value at one point in 2018. Although hedge funds are not perfect, their consensus picks do deliver solid returns, however. Our data show the top 20 S&P 500 stocks among hedge funds beat the S&P 500 Index by nearly 10 percentage points so far in 2019. Because hedge funds have a lot of resources and their consensus picks do well, we pay attention to what they think. In this article, we analyze what the elite funds think of Recro Pharma Inc (NASDAQ:REPH).
Recro Pharma Inc (NASDAQ:REPH) has seen an increase in support from the world’s most elite money managers lately. REPH was in 12 hedge funds’ portfolios at the end of September. There were 11 hedge funds in our database with REPH holdings at the end of the previous quarter. Our calculations also showed that REPH 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.
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’ 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.
Kevin Kotler of Broadfin Capital
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. 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 also rely on the best performing hedge funds‘ buy/sell signals. Let’s take a peek at the recent hedge fund action surrounding Recro Pharma Inc (NASDAQ:REPH).
What does smart money think about Recro Pharma Inc (NASDAQ:REPH)?
At Q3’s end, a total of 12 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 9% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in REPH over the last 17 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Engine Capital, managed by Arnaud Ajdler, holds the most valuable position in Recro Pharma Inc (NASDAQ:REPH). Engine Capital has a $12.2 million position in the stock, comprising 5.7% of its 13F portfolio. Coming in second is Corsair Capital Management, managed by Jay Petschek and Steven Major, which holds a $11 million position; the fund has 3.4% of its 13F portfolio invested in the stock. Remaining peers that hold long positions comprise Kevin Kotler’s Broadfin Capital, Renaissance Technologies and Thomas Ellis and Todd Hammer’s North Run Capital. In terms of the portfolio weights assigned to each position Engine Capital allocated the biggest weight to Recro Pharma Inc (NASDAQ:REPH), around 5.72% of its 13F portfolio. Corsair Capital Management is also relatively very bullish on the stock, designating 3.39 percent of its 13F equity portfolio to REPH.
As aggregate interest increased, key money managers have jumped into Recro Pharma Inc (NASDAQ:REPH) headfirst. Winton Capital Management, managed by David Harding, created the largest position in Recro Pharma Inc (NASDAQ:REPH). Winton Capital Management had $0.5 million invested in the company at the end of the quarter. Cliff Asness’s AQR Capital Management also made a $0.2 million investment in the stock during the quarter.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Recro Pharma Inc (NASDAQ:REPH) but similarly valued. These stocks are Satsuma Pharmaceuticals, Inc. (NASDAQ:STSA), Consolidated Water Co. Ltd. (NASDAQ:CWCO), Gladstone Land Corporation (NASDAQ:LAND), and Westwood Holdings Group, Inc. (NYSE:WHG). All of these stocks’ market caps are similar to REPH’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| STSA | 7 | 108938 | 7 |
| CWCO | 3 | 10018 | 0 |
| LAND | 6 | 6424 | 0 |
| WHG | 10 | 43281 | -1 |
| Average | 6.5 | 42165 | 1.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 6.5 hedge funds with bullish positions and the average amount invested in these stocks was $42 million. That figure was $50 million in REPH’s case. Westwood Holdings Group, Inc. (NYSE:WHG) is the most popular stock in this table. On the other hand Consolidated Water Co. Ltd. (NASDAQ:CWCO) is the least popular one with only 3 bullish hedge fund positions. Compared to these stocks Recro Pharma Inc (NASDAQ:REPH) 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. Hedge funds were also right about betting on REPH as the stock returned 66.4% during the first two months of Q4 and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
Disclosure: None. This article was originally published at Insider Monkey.
