Should You Avoid Theravance Biopharma Inc (TBPH)?

At Insider Monkey we track the activity of some of the best-performing hedge funds like Appaloosa Management, Baupost, and Third Point because we determined that some of the stocks that they are collectively bullish on can help us generate returns above the broader indices. Out of thousands of stocks that hedge funds invest in, small-caps can provide the best returns over the long term due to the fact that these companies are less efficiently priced and are usually under the radars of mass-media, analysts and dumb money. This is why we follow the smart money moves in the small-cap space.

Theravance Biopharma Inc (NASDAQ:TBPH) was in 10 hedge funds’ portfolios at the end of the third quarter of 2015. TBPH investors should be aware of a decrease in hedge fund interest lately. There were 13 hedge funds in our database with TBPH positions at the end of the previous quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Kirkland’s, Inc. (NASDAQ:KIRK), XO Group Inc (NYSE:XOXO), and Keryx Biopharmaceuticals (NASDAQ:KERX) to gather more data points.

Follow Theravance Biopharma Inc. (NASDAQ:TBPH)

Keeping this in mind, let’s check out the latest action encompassing Theravance Biopharma Inc (NASDAQ:TBPH).

How are hedge funds trading Theravance Biopharma Inc (NASDAQ:TBPH)?

At the end of the third quarter, a total of 10 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -23% from the second quarter. With hedgies’ sentiment swirling, there exists an “upper tier” of key hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Seth Klarman’s Baupost Group has the largest position in Theravance Biopharma Inc (NASDAQ:TBPH), worth close to $70.6 million, corresponding to 1.2% of its total 13F portfolio. The second most bullish fund manager is Rock Springs Capital Management, led by Kris Jenner, Gordon Bussard, Graham McPhail, holding a $6.6 million position; the fund has 0.5% of its 13F portfolio invested in the stock. Remaining professional money managers that hold long positions consist of David Charney and Sky Wilber’s Foundation Asset Management, Marc Majzner’s Clearline Capital and Chuck Royce’s Royce & Associates.

Because Theravance Biopharma Inc (NASDAQ:TBPH) has witnessed a declination in interest from hedge fund managers, it’s safe to say that there were a few funds that elected to cut their full holdings in the third quarter. Interestingly, Steven Boyd’s Armistice Capital dropped the biggest position of all the hedgies tracked by Insider Monkey, worth an estimated $12.7 million in stock, and Jim Simons’s Renaissance Technologies was right behind this move, as the fund dropped about $3.4 million worth. These transactions are intriguing to say the least, as total hedge fund interest fell by 3 funds in the third quarter.

Let’s also examine hedge fund activity in other stocks similar to Theravance Biopharma Inc (NASDAQ:TBPH). We will take a look at Kirkland’s, Inc. (NASDAQ:KIRK), XO Group Inc (NYSE:XOXO), Keryx Biopharmaceuticals (NASDAQ:KERX), and Mistras Group, Inc. (NYSE:MG). This group of stocks’ market caps match TBPH’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
KIRK 11 46620 -4
XOXO 16 108910 -1
KERX 16 122562 -2
MG 11 38747 1

As you can see these stocks had an average of 13.5 hedge funds with bullish positions and the average amount invested in these stocks was $79 million. That figure was $105 million in TBPH’s case. XO Group Inc (NYSE:XOXO) is the most popular stock in this table. On the other hand Kirkland’s, Inc. (NASDAQ:KIRK) is the least popular one with only 11 bullish hedge fund positions. Compared to these stocks Theravance Biopharma Inc (NASDAQ:TBPH) is even less popular than KIRK. Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case more research is warranted.