The financial regulations require hedge funds and wealthy investors that exceeded the $100 million equity holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn’t the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds’ positions on March 31st, about a week after the S&P 500 Index bottomed. We at Insider Monkey have made an extensive database of more than 821 of those established hedge funds and famous value investors’ filings. In this article, we analyze how these elite funds and prominent investors traded Eloxx Pharmaceuticals, Inc. (NASDAQ:ELOX) based on those filings.
Eloxx Pharmaceuticals, Inc. (NASDAQ:ELOX) was in 3 hedge funds’ portfolios at the end of March. ELOX has experienced a decrease in hedge fund interest recently. There were 4 hedge funds in our database with ELOX holdings at the end of the previous quarter. Our calculations also showed that ELOX isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 44 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
Nathan Fischel of DAFNA Capital Management
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, legendary investor Bill Miller told investors to sell 7 extremely popular recession stocks last month. So, we went through his list and recommended another stock with 100% upside potential instead. We interview hedge fund managers and ask them about their best ideas. You can watch our latest hedge fund manager interview here and find out the name of the large-cap healthcare stock that Sio Capital’s Michael Castor expects to double. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind let’s take a gander at the new hedge fund action regarding Eloxx Pharmaceuticals, Inc. (NASDAQ:ELOX).
How have hedgies been trading Eloxx Pharmaceuticals, Inc. (NASDAQ:ELOX)?
At the end of the first quarter, a total of 3 of the hedge funds tracked by Insider Monkey were long this stock, a change of -25% from the fourth quarter of 2019. On the other hand, there were a total of 0 hedge funds with a bullish position in ELOX a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, DAFNA Capital Management was the largest shareholder of Eloxx Pharmaceuticals, Inc. (NASDAQ:ELOX), with a stake worth $0.4 million reported as of the end of September. Trailing DAFNA Capital Management was Renaissance Technologies, which amassed a stake valued at $0.3 million. Citadel Investment Group was also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position DAFNA Capital Management allocated the biggest weight to Eloxx Pharmaceuticals, Inc. (NASDAQ:ELOX), around 0.16% of its 13F portfolio. Renaissance Technologies is also relatively very bullish on the stock, earmarking 0.0002 percent of its 13F equity portfolio to ELOX.
Judging by the fact that Eloxx Pharmaceuticals, Inc. (NASDAQ:ELOX) has experienced falling interest from the smart money, it’s easy to see that there was a specific group of hedgies that elected to cut their positions entirely by the end of the third quarter. Intriguingly, Israel Englander’s Millennium Management sold off the largest position of the “upper crust” of funds tracked by Insider Monkey, totaling an estimated $0.3 million in stock, and Donald Sussman’s Paloma Partners was right behind this move, as the fund dumped about $0.1 million worth. These bearish behaviors are important to note, as total hedge fund interest fell by 1 funds by the end of the third quarter.
Let’s now take a look at hedge fund activity in other stocks similar to Eloxx Pharmaceuticals, Inc. (NASDAQ:ELOX). We will take a look at Lightinthebox Holding Co Ltd-ADR (NYSE:LITB), Synalloy Corporation (NASDAQ:SYNL), Concord Medical Services Hldg Ltd (NYSE:CCM), and Security National Financial Corp. (NASDAQ:SNFCA). All of these stocks’ market caps are closest to ELOX’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| LITB | 1 | 324 | 0 |
| SYNL | 3 | 10601 | -1 |
| CCM | 1 | 425 | 0 |
| SNFCA | 1 | 797 | 0 |
| Average | 1.5 | 3037 | -0.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 1.5 hedge funds with bullish positions and the average amount invested in these stocks was $3 million. That figure was $1 million in ELOX’s case. Synalloy Corporation (NASDAQ:SYNL) is the most popular stock in this table. On the other hand Lightinthebox Holding Co Ltd-ADR (NYSE:LITB) is the least popular one with only 1 bullish hedge fund positions. Eloxx Pharmaceuticals, Inc. (NASDAQ:ELOX) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 7.9% in 2020 through May 22nd but still beat the market by 15.6 percentage points. Hedge funds were also right about betting on ELOX as the stock returned 78.6% in Q2 (through May 22nd) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.
