Hedge Funds Are Dumping Emergent Biosolutions Inc (EBS)

You probably know from experience that there is not as much information on small-cap companies as there is on large companies. Of course, this makes it really hard and difficult for individual investors to make proper and accurate analysis of certain small-cap companies. However, well-known and successful hedge fund investors like Carl Icahn and George Soros hold the necessary resources and abilities to conduct an extensive stock analysis on small-cap stocks, which enable them to make millions of dollars by identifying potential winners within the small-cap galaxy of stocks. This represents the main reason why Insider Monkey takes notice of the hedge fund activity in these overlooked stocks.

Emergent Biosolutions Inc (NYSE:EBS) has experienced a decrease in hedge fund interest of late. There were 17 hedge funds in our database with EBS holdings at the end of the previous quarter. At the end of this article we will also compare EBS to other stocks including 8Point3 Energy Partners LP (NASDAQ:CAFD), Terreno Realty Corporation (NYSE:TRNO), and Benefitfocus Inc (NASDAQ:BNFT) to get a better sense of its popularity.

At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.

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With all of this in mind, we’re going to take a glance at the key action encompassing Emergent Biosolutions Inc (NYSE:EBS).

How are hedge funds trading Emergent Biosolutions Inc (NYSE:EBS)?

Heading into the fourth quarter of 2016, a total of 14 of the hedge funds tracked by Insider Monkey were long this stock, a drop of 18% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards EBS over the last 5 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Jim Simons’ Renaissance Technologies holds the largest position in Emergent Biosolutions Inc (NYSE:EBS). According to its latest 13F filing, the fund has a $37.1 million position in the stock, comprising 0.1% of its 13F portfolio. The second largest stake is held by Peter Rathjens, Bruce Clarke and John Campbell of Arrowstreet Capital, with a $23.3 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Some other hedge funds and institutional investors with similar optimism contain D. E. Shaw’s D E Shaw, Ken Fisher’s Fisher Asset Management and Brian Taylor’s Pine River Capital Management. 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.

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, Israel Englander’s Millennium Management said dropped the largest investment of all the hedgies watched by Insider Monkey, comprising about $4.2 million in stock, and David Costen Haley’s HBK Investments was right behind this move, as the fund dumped about $0.7 million worth of Emergent Biosolutions Inc (NYSE:EBS) shares.

Let’s now review hedge fund activity in other stocks similar to Emergent Biosolutions Inc (NYSE:EBS). These stocks are 8Point3 Energy Partners LP (NASDAQ:CAFD), Terreno Realty Corporation (NYSE:TRNO), Benefitfocus Inc (NASDAQ:BNFT), and Caesars Entertainment Corp (NASDAQ:CZR). This group of stocks’ market values are closest to EBS’s market value.

As you can see these stocks had an average of 13 hedge funds with bullish positions and the average amount invested in these stocks was $103 million. That figure was $135 million in EBS’s case. Caesars Entertainment Corp (NASDAQ:CZR) is the most popular stock in this table. On the other hand Terreno Realty Corporation (NYSE:TRNO) is the least popular one with only 9 bullish hedge fund positions. Emergent Biosolutions Inc (NYSE:EBS) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard CZR might be a better candidate to consider taking a long position in.

Disclosure: none.