The week’s trading is underway and several biotech stocks are hot out of the gates, making big early morning gains. On the other hand, one stock broke stride at the starting line and is going backwards around the valuation track. Let’s dig into which stocks are doing what, and why.
Let’s start with Esperion Therapeutics Inc. (NASDAQ:ESPR), which took a big tumble towards the end of September, but which we noted had strong hedge fund sentiment backing it, which made it an attractive stock on the dip. Shares have made a big rebound since then, up by nearly 40%, including a 4.32% gain this morning. The latest surge came after Eli Lilly and Co (NYSE:LLY) announced that it would cease development of evacetrapib, which had been a potential competitor to Esperion Therapeutics Inc. (NASDAQ:ESPR)’s own cardiovascular treatment, which is in Phase 3 testing. Dennis Purcell’s Aisling Capital will be particularly pleased with the recent spurt in Esperion Therapeutics Inc. (NASDAQ:ESPR)’s stock, as it owned 1.64 million shares of it.
Whether elite hedge funds collectively like a stock or not is an important metric to consider, as these large investors show a great level of skill and expertise when it comes to picking stocks. Over the last few years equity hedge funds have trailed the market by a large margin, but that’s mostly due to their hedging and short positions, which perform poorly in a bull market. Their long positions performed far better, especially their small-cap picks, which have the potential to beat the market by 95 basis points per month on average, as our backtests showed. Our small-cap strategy involves imitating a portfolio of the 15 most popular small-cap picks among hedge funds and it has returned 102% since August 2012, beating the S&P 500 ETF (SPY) by over 53 percentage points (read more details here).
Let’s move on to Can Fite Biopharma Ltd (ADR) (NYSEMKT:CANF), which is up by 16.49% this morning. We covered the stock last month after it received Fast Track Designation from the FDA for its lung cancer drug CF102, which sent its shares skyrocketing by more than 200% in two days. Today it was announced that the same treatment, which is in Phase 2 testing, has received Orphan Drug designation by the EMA, which will open up Can Fite Biopharma Ltd (ADR) (NYSEMKT:CANF) to a wealth of incentives for the development of the treatment. Unfortunately for the investors that we track, not one of them held a position in the lucrative stock as of June 30. Jim Simons’ RenTech and Ken Griffin’s Citadel Advisors both owned miniscule positions in Can Fite Biopharma Ltd (ADR) (NYSEMKT:CANF) on March 31, but closed them during the second quarter.
We’ll check out two more hot stocks and the big morning loser on the following page.