Investing in hedge funds can bring large profits, but it’s not for everybody, since hedge funds are available only for high-net-worth individuals. They generate significant returns for investors to justify their large fees and they allocate a lot of time and employ a complex analysis to determine the best stocks to invest in. A particularly interesting group of stocks that hedge funds like is the small-caps. The huge amount of capital does not allow hedge funds to invest a lot in small-caps, but our research showed that their most popular small-cap ideas are less efficiently priced and generate stronger returns than their large- and mega-cap picks and the broader market. That is why we follow the hedge fund activity in the small-cap space.
Is Inotek Pharmaceuticals Corp (NASDAQ:ITEK) going to take off soon? Money managers are buying. The number of bullish hedge fund bets went up by 4 recently. ITEK was in 16 hedge funds’ portfolios at the end of September. There were 12 hedge funds in our database with ITEK 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 Nam Tai Property Inc (NYSE:NTP), Quotient Ltd (NASDAQ:QTNT), and Ascent Capital Group Inc (NASDAQ:ASCMA) to gather more data points.
At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.
What have hedge funds been doing with Inotek Pharmaceuticals Corp (NASDAQ:ITEK)?
At Q3’s end, a total of 16 of the hedge funds tracked by Insider Monkey held long positions in this stock, an increase of 33% from the previous quarter. The graph below displays the number of hedge funds with bullish position in ITEK over the last 5 quarters. With the smart money’s capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, OrbiMed Advisors, led by Samuel Isaly, holds the biggest position in Inotek Pharmaceuticals Corp (NASDAQ:ITEK). OrbiMed Advisors has a $17.5 million position in the stock. On OrbiMed Advisors’s heels is Point72 Asset Management, led by Steve Cohen, holding a $8.3 million position. Other members of the smart money with similar optimism comprise Phill Gross and Robert Atchinson’s Adage Capital Management, James A. Silverman’s Opaleye Management and Israel Englander’s Millennium Management. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.