Do Hedge Funds Love VIVUS, Inc. (VVUS)?

Reputable billionaire investors such as Nelson Peltz and David Tepper generate exorbitant profits for their wealthy accredited investors (a minimum of $1 million in investable assets would be required to invest in a hedge fund and most successful hedge funds won’t accept your savings unless you commit at least $5 million) by pinpointing winning small-cap stocks. There is little or no publicly-available information at all on some of these small companies, which makes it hard for an individual investor to pin down a winner within the small-cap space. However, hedge funds and other big asset managers can do the due diligence and analysis for you instead, thanks to their highly-skilled research teams and vast resources to conduct an appropriate evaluation process. Looking for potential winners within the small-cap galaxy of stocks? We believe following the smart money is a good starting point.

VIVUS, Inc. (NASDAQ:VVUS) was in 9 hedge funds’ portfolios at the end of the third quarter of 2016. VVUS shareholders have witnessed a decrease in enthusiasm from smart money of late. There were 10 hedge funds in our database with VVUS positions at the end of the previous quarter. 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 Marchex, Inc. (NASDAQ:MCHX), Entegra Financial Corp (NASDAQ:ENFC), and Community Bankers Trust Corp. (NASDAQ:ESXB) to gather more data points.

We follow over 700 hedge funds and other institutional investors and by analyzing their quarterly 13F filings, we identify stocks that they are collectively bullish on and develop investment strategies based on this data. One strategy that outperformed the market over the last year involves selecting the 100 best-performing funds and identifying the 30 mid-cap stocks that they are collectively most bullish on. Over the past year, this strategy generated returns of 18%, topping the 8% gain registered by S&P 500 ETFs. We launched this strategy 2.5 years ago and it returned more than 39% since then, vs. 22% gain registered by the S&P 500 ETFs.

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With all of this in mind, we’re going to take a look at the recent action encompassing VIVUS, Inc. (NASDAQ:VVUS).

How have hedgies been trading VIVUS, Inc. (NASDAQ:VVUS)?

At the end of the third quarter, a total of 9 of the hedge funds tracked by Insider Monkey were bullish on this stock, a drop of 10% from the second quarter of 2016. The graph below displays the number of hedge funds with bullish position in VVUS over the last 5 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

When looking at the institutional investors followed by Insider Monkey, Conan Laughlin’s North Tide Capital has the largest position in VIVUS, Inc. (NASDAQ:VVUS), worth close to $15.5 million, comprising 1.7% of its total 13F portfolio. Sitting at the No. 2 spot is Renaissance Technologies, one of the largest hedge funds in the world, with a $4.2 million position; the fund has less than 0.1% of its 13F portfolio invested in the stock. Other peers with similar optimism encompass Alex Denner’s Sarissa Capital Management, D. E. Shaw’s D E Shaw and Israel Englander’s Millennium Management. We should note that Sarissa Capital Management is 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.

Now that we’ve mentioned the most bullish investors, let’s also take a look at some funds that said goodbye to their entire stakes in the stock during the third quarter. Interestingly, Benjamin A. Smith’s Laurion Capital Management said goodbye to the biggest position of the 700 funds studied by Insider Monkey, totaling close to $0.2 million in stock, and Ben Levine, Andrew Manuel and Stefan Renold’s LMR Partners was right behind this move, as the fund sold off about $0.2 million worth of shares.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as VIVUS, Inc. (NASDAQ:VVUS) but similarly valued. We will take a look at Marchex, Inc. (NASDAQ:MCHX), Entegra Financial Corp (NASDAQ:ENFC), Community Bankers Trust Corp. (NASDAQ:ESXB), and Unique Fabricating Inc (NYSEMKT:UFAB). This group of stocks’ market valuations are similar to VVUS’s market valuation.

As you can see these stocks had an average of 6 hedge funds with bullish positions and the average amount invested in these stocks was $15 million. That figure was $24 million in VVUS’s case. Marchex, Inc. (NASDAQ:MCHX) is the most popular stock in this table. On the other hand Community Bankers Trust Corp. (NASDAQ:ESXB) is the least popular one with only 5 bullish hedge fund positions. Compared to these stocks VIVUS, Inc. (NASDAQ:VVUS) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.

Disclosure: None