We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Clough Capital Partners. One hedge fund selling its entire position doesn’t always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don’t think this is the case in this case because none of the 700+ hedge funds tracked by Insider Monkey identified CERU as a viable investment and initiated a position in the stock.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Cerulean Pharma Inc (NASDAQ:CERU) but similarly valued. These stocks are The Eastern Company (NASDAQ:EML), Connecture Inc (NASDAQ:CNXR), Tonix Pharmaceuticals Holding Corp. (NASDAQ:TNXP), and MRV Communications, Inc. (NASDAQ:MRVC). This group of stocks’ market values resemble CERU’s market value.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
As you can see these stocks had an average of 8 hedge funds with bullish positions and the average amount invested in these stocks was $27 million, higher than the $6 million in CERU’s case. Tonix Pharmaceuticals Holding Corp. (NASDAQ:TNXP) is the most popular stock in this table. On the other hand The Eastern Company (NASDAQ:EML) is the least popular one with only 4 bullish hedge fund positions. Cerulean Pharma Inc (NASDAQ:CERU) is not the least popular stock in this group, but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard TNXP might be a better candidate to consider a long position.