Reputable billionaire investors such as Jim Simons, Cliff Asness 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.
Hedge fund interest in Dicerna Pharmaceuticals Inc (NASDAQ:DRNA) shares was flat at the end of last quarter. This is usually a negative indicator. At the end of this article we will also compare DRNA to other stocks including Oritani Financial Corp. (NASDAQ:ORIT), Northfield Bancorp Inc (NASDAQ:NFBK), and Franklin Street Properties Corp. (NYSEAMEX:FSP) to get a better sense of its popularity.
At the moment there are a large number of gauges market participants can use to assess publicly traded companies. A pair of the most under-the-radar gauges are hedge fund and insider trading interest. Our experts have shown that, historically, those who follow the best picks of the best fund managers can trounce the S&P 500 by a healthy margin (see the details here).
Let’s view the recent hedge fund action regarding Dicerna Pharmaceuticals Inc (NASDAQ:DRNA).
What does the smart money think about Dicerna Pharmaceuticals Inc (NASDAQ:DRNA)?
At the end of the fourth quarter, a total of 20 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the second quarter of 2018. On the other hand, there were a total of 16 hedge funds with a bullish position in DRNA 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.
Among these funds, Bridger Management held the most valuable stake in Dicerna Pharmaceuticals Inc (NASDAQ:DRNA), which was worth $51 million at the end of the fourth quarter. On the second spot was Cormorant Asset Management which amassed $37.2 million worth of shares. Moreover, EcoR1 Capital, Adage Capital Management, and RA Capital Management were also bullish on Dicerna Pharmaceuticals Inc (NASDAQ:DRNA), allocating a large percentage of their portfolios to this stock.
Seeing as Dicerna Pharmaceuticals Inc (NASDAQ:DRNA) has witnessed falling interest from the smart money, we can see that there lies a certain “tier” of fund managers who were dropping their positions entirely by the end of the third quarter. At the top of the heap, Thomas Bailard’s Bailard Inc dropped the biggest position of the “upper crust” of funds tracked by Insider Monkey, comprising about $1.9 million in stock. Efrem Kamen’s fund, Pura Vida Investments, also cut its stock, about $0.8 million worth. These bearish behaviors are important to note, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s now review hedge fund activity in other stocks similar to Dicerna Pharmaceuticals Inc (NASDAQ:DRNA). We will take a look at Oritani Financial Corp. (NASDAQ:ORIT), Northfield Bancorp Inc (NASDAQ:NFBK), Franklin Street Properties Corp. (NYSEAMEX:FSP), and Carolina Financial Corporation (NASDAQ:CARO). All of these stocks’ market caps match DRNA’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ORIT | 8 | 39598 | 0 |
| NFBK | 4 | 29496 | 1 |
| FSP | 15 | 28612 | 8 |
| CARO | 8 | 41686 | 2 |
| Average | 8.75 | 34848 | 2.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 8.75 hedge funds with bullish positions and the average amount invested in these stocks was $35 million. That figure was $248 million in DRNA’s case. Franklin Street Properties Corp. (NYSEAMEX:FSP) is the most popular stock in this table. On the other hand Northfield Bancorp Inc (NASDAQ:NFBK) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks Dicerna Pharmaceuticals Inc (NASDAQ:DRNA) is more popular among hedge funds. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Hedge funds were also right about betting on DRNA as the stock returned 29.5% and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
Disclosure: None. This article was originally published at Insider Monkey.
