In this article we will check out the progression of hedge fund sentiment towards Opiant Pharmaceuticals, Inc. (NASDAQ:OPNT) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.
Opiant Pharmaceuticals, Inc. (NASDAQ:OPNT) investors should pay attention to a decrease in activity from the world’s largest hedge funds recently. Opiant Pharmaceuticals, Inc. (NASDAQ:OPNT) was in 3 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistics is 4. There were 4 hedge funds in our database with OPNT holdings at the end of June. Our calculations also showed that OPNT isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 66 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. With all of this in mind let’s analyze the latest hedge fund action encompassing Opiant Pharmaceuticals, Inc. (NASDAQ:OPNT).
What does smart money think about Opiant Pharmaceuticals, Inc. (NASDAQ:OPNT)?
At Q3’s end, a total of 3 of the hedge funds tracked by Insider Monkey were long this stock, a change of -25% from one quarter earlier. On the other hand, there were a total of 2 hedge funds with a bullish position in OPNT a year ago. With hedge funds’ capital changing hands, there exists a few noteworthy hedge fund managers who were boosting their stakes meaningfully (or already accumulated large positions).
More specifically, Renaissance Technologies was the largest shareholder of Opiant Pharmaceuticals, Inc. (NASDAQ:OPNT), with a stake worth $1.6 million reported as of the end of September. Trailing Renaissance Technologies was Fondren Management, which amassed a stake valued at $1 million. Springbok Capital was also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Fondren Management allocated the biggest weight to Opiant Pharmaceuticals, Inc. (NASDAQ:OPNT), around 6.05% of its 13F portfolio. Renaissance Technologies is also relatively very bullish on the stock, earmarking 0.0016 percent of its 13F equity portfolio to OPNT.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Royce & Associates. 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 750+ hedge funds tracked by Insider Monkey identified OPNT as a viable investment and initiated a position in the stock.
Let’s check out hedge fund activity in other stocks similar to Opiant Pharmaceuticals, Inc. (NASDAQ:OPNT). These stocks are Unico American Corporation (NASDAQ:UNAM), CPI Aerostructures, Inc. (NYSE:CVU), BP Prudhoe Bay Royalty Trust (NYSE:BPT), PHX Minerals Inc. (NYSE:PHX), Dare Bioscience, Inc. (NASDAQ:DARE), Condor Hospitality Trust, Inc. (NYSE:CDOR), and Motus GI Holdings, Inc. (NASDAQ:MOTS). This group of stocks’ market valuations are similar to OPNT’s market valuation.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 3.1 hedge funds with bullish positions and the average amount invested in these stocks was $2 million. That figure was $3 million in OPNT’s case. Motus GI Holdings, Inc. (NASDAQ:MOTS) is the most popular stock in this table. On the other hand Unico American Corporation (NASDAQ:UNAM) is the least popular one with only 1 bullish hedge fund positions. Opiant Pharmaceuticals, Inc. (NASDAQ:OPNT) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for OPNT is 40.8. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 28.1% in 2020 through November 23rd and still beat the market by 15.4 percentage points. A small number of hedge funds were also right about betting on OPNT as the stock returned 15.4% since the end of the third quarter (through 11/23) and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.