The elite funds run by legendary investors such as David Tepper and Dan Loeb make hundreds of millions of dollars for themselves and their investors by spending enormous resources doing research on small cap stocks that big investment banks don’t follow. Because of their pay structures, they have strong incentives to do the research necessary to beat the market. That’s why we pay close attention to what they think in small cap stocks. In this article, we take a closer look at Lexicon Pharmaceuticals, Inc. (NASDAQ:LXRX) from the perspective of those elite funds.
Lexicon Pharmaceuticals, Inc. (NASDAQ:LXRX) investors should pay attention to an increase in support from the world’s most elite money managers of late. Our calculations also showed that LXRX isn’t among the 30 most popular stocks among hedge funds.
In the eyes of most investors, hedge funds are perceived as underperforming, old investment tools of the past. While there are over 8000 funds with their doors open at present, We look at the elite of this club, approximately 750 funds. It is estimated that this group of investors oversee the lion’s share of the smart money’s total asset base, and by following their top picks, Insider Monkey has deciphered many investment strategies that have historically outpaced the broader indices. Insider Monkey’s flagship hedge fund strategy surpassed the S&P 500 index by nearly 5 percentage points per year since its inception in May 2014 through early November 2018. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 27.5% since February 2017 (through March 12th) even though the market was up nearly 25% during the same period. We just shared a list of 6 short targets in our latest quarterly update and they are already down an average of 6% in less than a month.
We’re going to take a peek at the fresh hedge fund action encompassing Lexicon Pharmaceuticals, Inc. (NASDAQ:LXRX).
How have hedgies been trading Lexicon Pharmaceuticals, Inc. (NASDAQ:LXRX)?
Heading into the first quarter of 2019, a total of 11 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 10% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in LXRX over the last 14 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Lexicon Pharmaceuticals, Inc. (NASDAQ:LXRX) was held by Renaissance Technologies, which reported holding $2.3 million worth of stock at the end of December. It was followed by D E Shaw with a $1.8 million position. Other investors bullish on the company included Marshall Wace LLP, PDT Partners, and Millennium Management.
As aggregate interest increased, key money managers have been driving this bullishness. Weld Capital Management, managed by Minhua Zhang, initiated the most outsized position in Lexicon Pharmaceuticals, Inc. (NASDAQ:LXRX). Weld Capital Management had $0.2 million invested in the company at the end of the quarter. Noam Gottesman’s GLG Partners also initiated a $0.1 million position during the quarter. The only other fund with a brand new LXRX position is Matthew Strobeck’s Birchview Capital.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Lexicon Pharmaceuticals, Inc. (NASDAQ:LXRX) but similarly valued. These stocks are Central European Media Enterprises Ltd. (NASDAQ:CETV), Stoneridge, Inc. (NYSE:SRI), Community Trust Bancorp, Inc. (NASDAQ:CTBI), and American Outdoor Brands Corporation (NASDAQ:AOBC). This group of stocks’ market caps resemble LXRX’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CETV | 5 | 1243 | -2 |
| SRI | 15 | 71331 | -3 |
| CTBI | 7 | 16240 | -2 |
| AOBC | 14 | 109405 | -5 |
| Average | 10.25 | 49555 | -3 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 10.25 hedge funds with bullish positions and the average amount invested in these stocks was $50 million. That figure was $10 million in LXRX’s case. Stoneridge, Inc. (NYSE:SRI) is the most popular stock in this table. On the other hand Central European Media Enterprises Ltd. (NASDAQ:CETV) is the least popular one with only 5 bullish hedge fund positions. Lexicon Pharmaceuticals, Inc. (NASDAQ:LXRX) 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. 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. Unfortunately LXRX wasn’t nearly as popular as these 15 stock and hedge funds that were betting on LXRX were disappointed as the stock returned -14.8% and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 15 most popular stocks) among hedge funds as 13 of these stocks already outperformed the market this year.
Disclosure: None. This article was originally published at Insider Monkey.
