The markets are slightly down today with all three indices in the red, but shares of Prima BioMed Ltd (ADR) (NASDAQ:PBMD), Twitter Inc (NYSE:TWTR), WPX Energy Inc (NYSE:WPX), and Southwestern Energy Company (NYSE:SWN) are going the opposite way. So let’s take a closer look at these stocks and see what the smart money investors think about them.
Why do we pay attention to hedge fund sentiment? Most investors ignore hedge funds’ moves because as a group their average net returns trailed the market since 2008 by a large margin. Unfortunately, most investors don’t realize that hedge funds are hedged and they also charge an arm and a leg, so they are likely to underperform the market in a bull market. We ignore their short positions and by imitating hedge funds’ stock picks independently, we don’t have to pay them a dime. Our research has shown that hedge funds’ long stock picks generate strong risk adjusted returns. For instance the 15 most popular small-cap stocks outperformed the S&P 500 Index by an average of 95 basis points per month in our back-tests spanning the 1999-2012 period. We have been tracking the performance of these stocks in real-time since the end of August 2012. After all, things change and we need to verify that back-test results aren’t just a statistical fluke. We weren’t proven wrong. These 15 stocks have managed to return more than 102% since August 2012 and outperformed the S&P 500 Index by some 53 percentage points (see more details here).
The first on the list is Prima BioMed Ltd (ADR) (NASDAQ:PBMD), whose stock is well in the green by 9%, after the analysts at Roth Capital initiated a ‘Buy’ recommendation with a $6 price target on the company, giving the stock 400% upside potential, compared to the actual trading price of $1.2. Roth follows FBR & Co., which initiated coverage on the stock earlier this month, setting also a $6.00 price target with ‘Outperform’ rating.
Second in our list is Twitter Inc (NYSE:TWTR), whose shares are up by around 2% today amid the announcement that Twitter is going to restore the Politwoops, a website that saves the deleted tweets posted by politicians. The service was shut down earlier this year and the decision faced criticism in connection with political transparency. Twitter Inc (NYSE:TWTR) registered a decrease in popularity among the funds we track, with 27 investors holding long positions versus 47 funds in the June – September period, amassing around 1.4% of its outstanding stock. D.E. Shaw‘s D E Shaw is the largest shareholder of the company among the investors we follow, with 1.08 million shares valued at $29.1 million as of the end of the third quarter.