We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do (like Ackman’s recent Valeant losses). However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards Inotek Pharmaceuticals Corp (NASDAQ:ITEK).
Is Inotek Pharmaceuticals Corp (NASDAQ:ITEK) a buy, sell, or hold? Hedge funds are betting on the stock, as the number of bullish hedge fund positions rose by 9 lately. At the end of this article we will also compare ITEK to other stocks, including Lawson Products, Inc. (NASDAQ:LAWS), Adept Technology Inc (NASDAQ:ADEP), and Nabriva Therapeutics AG-ADR (NASDAQ:NBRV) to get a better sense of its popularity.
In the eyes of most stock holders, hedge funds are viewed as slow, old financial tools of the past. While there are over 8000 funds trading at the moment, our researchers choose to focus on the bigwigs of this group, approximately 700 funds. These hedge fund managers have their hands on the majority of all hedge funds’ total asset base, and by observing their inimitable investments, Insider Monkey has deciphered various investment strategies that have historically outrun the broader indices. Insider Monkey’s small-cap hedge fund strategy defeated the S&P 500 index by 12 percentage points per annum for a decade in their back tests.
Keeping this in mind, let’s take a look at the fresh action regarding Inotek Pharmaceuticals Corp (NASDAQ:ITEK).
What does the smart money think about Inotek Pharmaceuticals Corp (NASDAQ:ITEK)?
Heading into Q4, a total of 12 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 300% from one quarter earlier. With the smart money’s capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were increasing their holdings considerably (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Point72 Asset Management, managed by Steve Cohen, holds the biggest position in Inotek Pharmaceuticals Corp (NASDAQ:ITEK). Point72 Asset Management has a $11.3 million position in the stock, comprising 0.1% of its 13F portfolio. On Point72 Asset Management’s heels is Opaleye Management, led by James A. Silverman, holding a $6 million position; the fund has 3% of its 13F portfolio invested in the stock. Some other members of the smart money with similar optimism consist of Samuel Isaly’s OrbiMed Advisors and Phill Gross and Robert Atchinson’s Adage Capital Management.
Now, key money managers have been driving this bullishness. Point72 Asset Management created the largest position in Inotek Pharmaceuticals Corp (NASDAQ:ITEK), followed by Samuel Isaly’s OrbiMed Advisors, which made a $4 million investment in the stock during the quarter. The following funds were also among the new ITEK investors: Adage Capital Management, Clifford Fox’s Columbus Circle Investors, and Mark Kingdon’s Kingdon Capital.
Let’s also examine hedge fund activity in other stocks similar to Inotek Pharmaceuticals Corp (NASDAQ:ITEK). We will take a look at Lawson Products, Inc. (NASDAQ:LAWS), Adept Technology Inc (NASDAQ:ADEP), Nabriva Therapeutics AG-ADR (NASDAQ:NBRV), and Radiant Logistics, Inc. (NYSEAMEX:RLGT). This group of stocks’ market values are similar to ITEK’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 8.5 hedge funds with bullish positions and the average amount invested in these stocks was $20 million, compared to $30 million in ITEK’s case. Radiant Logistics, Inc. (NYSEAMEX:RLGT) is the most popular stock in this table with 12 funds reporting stakes, while Lawson Products, Inc. (NASDAQ:LAWS) is the least popular one with only 6 bullish hedge fund positions. Inotek Pharmaceuticals Corp (NASDAQ:ITEK) is not the most popular stock in this group, but hedge fund interest is still above average. This is a slightly positive signal, but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard RLGT might be a better candidate to consider.