It’s a little-known fact that stock performance is not evenly distributed (i.e. you don’t have a 50/50 chance of picking a market-beating stock). In fact, despite the S&P 500 gaining about 5.2% between November 1, 2014 and October 30, 2015, less than 49% of the stocks in the index beat the market during that time. In contrast, the 30 stocks from the index which were the most popular among the investors that we track returned 9.5% during that time and 63% of them beat the market. This shows that while hedge funds get a lot of flak from the mainstream media for their performance, it can be rewarding to follow their moves using the right sets of data. Even then, there is never a fool proof strategy to generating returns, as even the collective wisdom of top hedge funds gets it wrong some times, as in the case of some of their top picks from the index like Micron and Anadarko. The data though, shows that following the collective wisdom of select hedge funds can be a very wise move overall.
ProNAi Therapeutics Inc (NASDAQ:DNAI) has experienced an increase in activity from the world’s largest hedge funds recently. DNAI was in 12 hedge funds’ portfolios at the end of September. There were 0 hedge funds in our database with DNAI holdings at the end of the previous quarter because DNAI did its IPO in July. At the end of this article we will also compare DNAI to other stocks including Quanex Building Products Corporation (NYSE:NX), Tile Shop Hldgs, Inc. (NASDAQ:TTS), and Walter Investment Management Corp (NYSE:WAC) to get a better sense of its popularity.
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With all of this in mind, let’s take a gander at the recent action encompassing ProNAi Therapeutics Inc (NASDAQ:DNAI).
What does the smart money think about ProNAi Therapeutics Inc (NASDAQ:DNAI)?
When looking at the institutional investors followed by Insider Monkey, OrbiMed Advisors, managed by Samuel Isaly, holds the number one position in ProNAi Therapeutics Inc (NASDAQ:DNAI). OrbiMed Advisors has a $40.8 million position in the stock, comprising 0.4% of its 13F portfolio. Coming in second is Deerfield Management, led by James E. Flynn, holding a $27.7 million position; 1.1% of its 13F portfolio is allocated to the stock. Some other peers that are bullish comprise Jerome Pfund and Michael Sjostrom’s Sectoral Asset Management, Peter Kolchinsky’s RA Capital Management and Kyle Bass’s Hayman Advisors.
Let’s check out hedge fund activity in other stocks similar to ProNAi Therapeutics Inc (NASDAQ:DNAI). These stocks are Quanex Building Products Corporation (NYSE:NX), Tile Shop Hldgs, Inc. (NASDAQ:TTS), Walter Investment Management Corp (NYSE:WAC), and Barnes & Noble Education Inc (NYSE:BNED). This group of stocks’ market valuations are closest to DNAI’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| NX | 21 | 95654 | 3 |
| TTS | 20 | 109809 | 10 |
| WAC | 5 | 353896 | -1 |
| BNED | 19 | 157971 | 19 |
As you can see these stocks had an average of 16.25 hedge funds with bullish positions and the average amount invested in these stocks was $179 million. That figure was $120 million in DNAI’s case. Quanex Building Products Corporation (NYSE:NX) is the most popular stock in this table. On the other hand Walter Investment Management Corp (NYSE:WAC) is the least popular one with only 5 bullish hedge fund positions. ProNAi Therapeutics Inc (NASDAQ:DNAI) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard NX might be a better candidate to consider a long position.