Hedge fund managers like David Einhorn, Dan Loeb, or Carl Icahn became billionaires through reaping large profits for their investors, which is why piggybacking their stock picks may provide us with significant returns as well. Many hedge funds, like Paul Singer’s Elliott Management, are pretty secretive, but we can still get some insights by analyzing their quarterly 13F filings. One of the most fertile grounds for large abnormal returns is hedge funds’ most popular small-cap picks, which are not so widely followed and often trade at a discount to their intrinsic value. In this article we will check out hedge fund activity in another small-cap stock: Aratana Therapeutics Inc (NASDAQ:PETX) .
Is Aratana Therapeutics Inc (NASDAQ:PETX) a sound investment now? Hedge funds are genuinely betting on the stock. The number of long hedge fund bets that are revealed through the 13F filings grew by 8 in recent months. There were 17 hedge funds in our database with PETX positions at the end of September. At the end of this article we will also compare PETX to other stocks including United Community Financial Corp (NASDAQ:UCFC), Kadmon Holdings Inc (NYSE:KDMN), and Spartan Motors Inc (NASDAQ:SPAR) to get a better sense of its popularity.
Follow Aratana Therapeutics Inc. (NASDAQ:PETX)
Follow Aratana Therapeutics Inc. (NASDAQ:PETX)
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, let’s review the recent action regarding Aratana Therapeutics Inc (NASDAQ:PETX).
How are hedge funds trading Aratana Therapeutics Inc (NASDAQ:PETX)?
At Q3’s end, a total of 17 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 89% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards PETX over the last 5 quarters. With hedgies’ capital changing hands, there exists a select group of notable hedge fund managers who were upping their holdings significantly (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, Broadfin Capital, led by Kevin Kotler, holds the largest position in Aratana Therapeutics Inc (NASDAQ:PETX). Broadfin Capital has a $28.9 million position in the stock, comprising 2.6% of its 13F portfolio. On Broadfin Capital’s heels is D. E. Shaw’s D E Shaw, one of the biggest hedge funds in the world, which holds a $2.6 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Other hedge funds and institutional investors that are bullish encompass Israel Englander’s Millennium Management, Neil Shah’s March Altus Capital Management and Neil Chriss’s Hutchin Hill Capital. 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.
Consequently, specific money managers were leading the bulls’ herd. D E Shaw, led by D. E. Shaw, created the most valuable position in Aratana Therapeutics Inc (NASDAQ:PETX). D E Shaw had $2.6 million invested in the company at the end of the quarter. Israel Englander’s Millennium Management also initiated a $2.5 million position during the quarter. The other funds with brand new PETX positions are Neil Chriss’s Hutchin Hill Capital, Paul Marshall and Ian Wace’s Marshall Wace LLP, and Cliff Asness’s AQR Capital Management.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Aratana Therapeutics Inc (NASDAQ:PETX) but similarly valued. These stocks are United Community Financial Corp (NASDAQ:UCFC), Kadmon Holdings Inc (NYSE:KDMN), Spartan Motors Inc (NASDAQ:SPAR), and Jive Software Inc (NASDAQ:JIVE). This group of stocks’ market valuations resemble PETX’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| UCFC | 8 | 33765 | 0 |
| KDMN | 11 | 96607 | 11 |
| SPAR | 14 | 49536 | 1 |
| JIVE | 13 | 48850 | -2 |
As you can see these stocks had an average of 11.5 hedge funds with bullish positions and the average amount invested in these stocks was $57 million. That figure was $42 million in PETX’s case. Spartan Motors Inc (NASDAQ:SPAR) is the most popular stock in this table. On the other hand United Community Financial Corp (NASDAQ:UCFC) is the least popular one with only 8 bullish hedge fund positions. Compared to these stocks Aratana Therapeutics Inc (NASDAQ:PETX) 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.
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