There are several ways to beat the market, and investing in small cap stocks has historically been one of them. We like to improve the odds of beating the market further by examining what famous hedge fund operators such as Carl Icahn and George Soros think. Those hedge fund operators make billions of dollars each year by hiring the best and the brightest to do research on stocks, including small cap stocks that big brokerage houses simply don’t cover. Because of Carl Icahn and other successful funds’ exemplary historical records, we pay attention to their small cap picks. In this article, we use hedge fund filing data to analyze Amphastar Pharmaceuticals Inc (NASDAQ:AMPH).
Amphastar Pharmaceuticals Inc (NASDAQ:AMPH) shares didn’t see a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 10 hedge funds’ portfolios at the end of the third quarter of 2016. 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 Sonic Automotive Inc (NYSE:SAH), Hi-Crush Partners LP (NYSE:HCLP), and Tile Shop Hldgs, Inc. (NASDAQ:TTS) to gather more data points.
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Follow Amphastar Pharmaceuticals Inc. (NASDAQ:AMPH)
We care about hedge fund sentiment because historically hedge funds’ stock picks delivered strong risk adjusted returns. There are certain segments of the market where hedge funds’ stock picks performed much better than its benchmarks. For instance, the 30 most popular mid-cap stocks among the best performing hedge funds returned 18% over the last 12 months outpacing S&P 500 Index by more than 10 percentage points. We developed this strategy 2.5 years ago and started sharing its picks in our quarterly newsletter. It bested the S&P 500 Index ETFs by delivering a solid 39% vs. 22% gain for its benchmarks.
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What does the smart money think about Amphastar Pharmaceuticals Inc (NASDAQ:AMPH)?
Heading into the fourth quarter of 2016, a total of 10 of the hedge funds tracked by Insider Monkey held long positions in this stock, unchanged from the second quarter of 2016. Below, you can check out the change in hedge fund sentiment towards AMPH over the last 5 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Fisher Asset Management, led by Ken Fisher, holds the largest position in Amphastar Pharmaceuticals Inc (NASDAQ:AMPH). Fisher Asset Management has a $3.8 million position in the stock. On Fisher Asset Management’s heels is Cliff Asness of AQR Capital Management, with a $2 million position. Other professional money managers with similar optimism encompass John Overdeck and David Siegel’s Two Sigma Advisors, Ken Griffin’s Citadel Investment Group and David Costen Haley’s HBK Investments. 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.
Judging by the fact that Amphastar Pharmaceuticals Inc (NASDAQ:AMPH) has experienced bearish sentiment from the smart money, we can see that there is a sect of fund managers who sold off their positions entirely by the end of the third quarter. At the top of the heap, Vishal Saluja and Pham Quang’s Endurant Capital Management got rid of the biggest investment of all the hedgies watched by Insider Monkey, valued at about $0.8 million in stock, and D E Shaw, one of the biggest hedge funds in the world was right behind this move, as the fund dropped about $0.2 million worth of shares.
Let’s check out hedge fund activity in other stocks similar to Amphastar Pharmaceuticals Inc (NASDAQ:AMPH). We will take a look at Sonic Automotive Inc (NYSE:SAH), Hi-Crush Partners LP (NYSE:HCLP), Tile Shop Hldgs, Inc. (NASDAQ:TTS), and CenterState Banks Inc (NASDAQ:CSFL). This group of stocks’ market valuations match AMPH’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SAH | 13 | 38493 | 3 |
| HCLP | 10 | 72699 | -2 |
| TTS | 15 | 91252 | -6 |
| CSFL | 18 | 56172 | 5 |
As you can see these stocks had an average of 14 hedge funds with bullish positions and the average amount invested in these stocks was $65 million. That figure was $13 million in AMPH’s case. CenterState Banks Inc (NASDAQ:CSFL) is the most popular stock in this table. On the other hand Hi-Crush Partners LP (NYSE:HCLP) is the least popular one with only 10 bullish hedge fund positions. Compared to these stocks Amphastar Pharmaceuticals Inc (NASDAQ:AMPH) is even less popular than HCLP. Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case more research is warranted.
Disclosure: None
