Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed over the past few years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets, hoping that they will outperform the broader market. Our research shows that hedge funds do have great stock picking skills, so let’s take a glance at the smart money sentiment towards Medgenics Inc (NYSEMKT:MDGN).
Medgenics Inc (NYSEMKT:MDGN) shares haven’t seen a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 7 hedge funds’ portfolios at the end of the third quarter of 2015. At the end of this article we will also compare MDGN to other stocks, including JAKKS Pacific, Inc. (NASDAQ:JAKK), Calamos Asset Management, Inc (NASDAQ:CLMS), and Medley Management Inc (NYSE:MDLY) to get a better sense of its popularity.
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Today there are a multitude of gauges stock traders use to grade stocks. A couple of the most under-the-radar gauges are hedge fund and insider trading interest. We have shown that, historically, those who follow the top picks of the best money managers can trounce their index-focused peers by a solid amount (see the details here).
Keeping this in mind, let’s go over the fresh action regarding Medgenics Inc (NYSEMKT:MDGN).
Hedge fund activity in Medgenics Inc (NYSEMKT:MDGN)
At Q3’s end, a total of 7 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the second quarter. With hedge funds’ positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, Kevin Kotler’s Broadfin Capital has the biggest position in Medgenics Inc (NYSEMKT:MDGN), worth close to $12.1 million, accounting for 0.7% of its total 13F portfolio. The second most bullish fund manager is Opaleye Management, managed by James A. Silverman, which holds an $8.3 million position; 4.1% of its 13F portfolio is allocated to the stock. Other hedge funds and institutional investors that hold long positions contain Hal Mintz’s Sabby Capital, Daniel Gold’s QVT Financial and Anand Parekh’s Alyeska Investment Group.
Due to the fact that Medgenics Inc (NYSEMKT:MDGN) has witnessed declining sentiment from the aggregate hedge fund industry, logic holds that there lies a certain “tier” of money managers that decided to sell off their entire stakes in the third quarter. At the top of the heap, Joseph Edelman’s Perceptive Advisors cut the largest investment of the 700 funds monitored by Insider Monkey, valued at an estimated $2.9 million in stock, and Jim Simons’s Renaissance Technologies was right behind this move, as the fund cut about $0.3 million worth. These bearish behaviors are interesting, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Medgenics Inc (NYSEMKT:MDGN) but similarly valued. We will take a look at JAKKS Pacific, Inc. (NASDAQ:JAKK), Calamos Asset Management, Inc (NASDAQ:CLMS), Medley Management Inc (NYSE:MDLY), and Pernix Therapeutics Holdings Inc (NASDAQ:PTX). All of these stocks’ market caps are closest to MDGN’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| JAKK | 16 | 31213 | 2 |
| CLMS | 7 | 9734 | 0 |
| MDLY | 4 | 8935 | 1 |
| PTX | 17 | 84240 | -2 |
As you can see these stocks had an average of 11 hedge funds with bullish positions and the average amount invested in these stocks was $34 million, compared to $26 million in MDGN’s case. Pernix Therapeutics Holdings Inc (NASDAQ:PTX) is the most popular stock in this table. On the other hand Medley Management Inc (NYSE:MDLY) is the least popular one with only 4 bullish hedge fund positions. Medgenics Inc (NYSEMKT:MDGN) is not the least popular stock in this group, but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard PTX might be a better candidate to consider a long position.
