Investing in hedge funds can bring large profits, but it’s not for everybody, since hedge funds are available only for high-net-worth individuals. They generate significant returns for investors to justify their large fees and they allocate a lot of time and employ a complex analysis to determine the best stocks to invest in. A particularly interesting group of stocks that hedge funds like is the small-caps. The huge amount of capital does not allow hedge funds to invest a lot in small-caps, but our research showed that their most popular small-cap ideas are less efficiently priced and generate stronger returns than their large- and mega-cap picks and the broader market. That is why we follow the hedge fund activity in the small-cap space.
On the back of disappointing trial results, Tetraphase Pharmaceuticals Inc (NASDAQ:TTPH)’s stock plunged on September 9, which caused many large investors to head for the exits. The stock was in 15 hedge funds’ portfolios at the end of September, compared to 21 hedge funds in our database with TTPH holdings at the end of the previous quarter. At the end of this article we will also compare TTPH to other stocks, including The York Water Company (NASDAQ:YORW), Akarti Therapeutics PLC (ADR) (NASDAQ:AKTX), and Trinity Biotech plc (ADR) (NASDAQ:TRIB) to get a better sense of its popularity.
Follow Tetraphase Pharmaceuticals Inc (NASDAQ:TTPH)
Follow Tetraphase Pharmaceuticals Inc (NASDAQ:TTPH)
Today there are a lot of metrics stock traders use to grade stocks. Two of the most under-the-radar metrics are hedge fund and insider trading indicators. Our experts have shown that, historically, those who follow the best picks of the top hedge fund managers can outperform the S&P 500 by a superb margin (see the details here).
With all of this in mind, let’s review the latest action surrounding Tetraphase Pharmaceuticals Inc (NASDAQ:TTPH).
Hedge fund activity in Tetraphase Pharmaceuticals Inc (NASDAQ:TTPH)
Heading into Q4, a total of 15 of the hedge funds tracked by Insider Monkey were bullish on this stock, a drop of 29% from the previous quarter. With hedge funds’ capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were upping their holdings considerably (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Great Point Partners, managed by Jeffrey Jay and David Kroin, holds the number one position in Tetraphase Pharmaceuticals Inc (NASDAQ:TTPH). Great Point Partners has a $8.4 million position in the stock, comprising 3.3% of its 13F portfolio. On Great Point Partners’s heels is Sectoral Asset Management, led by Jerome Pfund and Michael Sjostrom, holding a $5.2 million position; the fund has 0.2% of its 13F portfolio invested in the stock. Other professional money managers that are bullish include Farallon Capital, Howard Guberman’s Gruss Asset Management, and Israel Englander’s Millennium Management.
Judging by the fact that Tetraphase Pharmaceuticals Inc (NASDAQ:TTPH) has experienced a bearish sentiment from the smart money, it’s safe to say that there exists a select few fund managers who were dropping their full holdings last quarter. It’s worth mentioning that Steve Cohen’s Point72 Asset Management dumped the biggest position of the 700 funds watched by Insider Monkey, totaling about $29.7 million in stock. Brian Ashford-Russell and Tim Woolley’s fund, Polar Capital, also dropped its stock, about $22.9 million worth. These moves are interesting, as total hedge fund interest dropped by 6 funds last quarter.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Tetraphase Pharmaceuticals Inc (NASDAQ:TTPH) but similarly valued. We will take a look at The York Water Company (NASDAQ:YORW), Akarti Therapeutics PLC (ADR) (NASDAQ:AKTX), Trinity Biotech plc (ADR) (NASDAQ:TRIB), and American Software, Inc. (NASDAQ:AMSWA). All of these stocks’ market caps match TTPH’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| YORW | 5 | 7987 | 2 |
| AKTX | 9 | 61820 | 9 |
| TRIB | 20 | 57248 | 1 |
| AMSWA | 7 | 18267 | 2 |
As you can see these stocks had an average of 10 hedge funds with bullish positions and the average amount invested in these stocks was $36 million. That figure was $27 million in TTPH’s case. Trinity Biotech plc (ADR) (NASDAQ:TRIB) is the most popular stock in this table. On the other hand The York Water Company (NASDAQ:YORW) is the least popular one with only 5 bullish hedge fund positions. Tetraphase Pharmaceuticals Inc (NASDAQ:TTPH) 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 TRIB might be a better candidate to consider a long position.
