How Hedge Funds Were Passing Around Marijuana Stocks in Q2

#3 Arena Pharmaceuticals, Inc. (NASDAQ:ARNA)

– Hedge Funds with Long Positions (as of June 30): 9

– Value of Hedge Funds’ Holdings (as of June 30): $29 Million

Moving on, the number of hedge funds in our system that were long Arena Pharmaceuticals, Inc. (NASDAQ:ARNA) inched up by one during the second quarter, to nine. However, the aggregate value of their holdings in the company dropped by 40% during the period. Hedge funds that increased their stake in the company during the second quarter included billionaire Jim Simons‘ Renaissance Technologies and Gavin Saitowitz and Cisco J. Del Valle’s Springbok Capital. Arena Pharmaceuticals, Inc. (NASDAQ:ARNA)’s stock has lost over 80% of its value since the beginning of 2013 and has been extremely volatile this year. Earlier this month, the company announced that its chief scientific officer, Dr. Dominic Behan, who is also one of the co-founders of Arena, will be resigning from the company and heading to Beacon Discovery Inc., which will conduct research for Arena Pharmaceuticals under contract. Dr. Behan is the second co-founder to have resigned from the company in the last year, though most analysts see the change of guard as a positive move.

#2 Insys Therapeutics Inc (NASDAQ:INSY)

– Hedge Funds with Long Positions (as of June 30): 17

– Value of Hedge Funds’ Holdings (as of June 30): $254.32 Million

The ownership of Insys Therapeutics Inc (NASDAQ:INSY) among the funds tracked by Insider Monkey remained unchanged during the second quarter, though the aggregate value of their holdings in it slid by $44.9 million. In the last two years, Insys Therapeutics Inc (NASDAQ:INSY)’s stock has made an inverted V-shape pattern, reversing the uptrend it saw from mid-2014 to mid-2015 in the period since. Shares of the Arizona-based specialty pharmaceutical company did spike by over 9% on August 24 after it announced successful results from its Phase 3 study assessing Buprenorphine Sublingual Spray, which is meant for the treatment of moderate-to-severe postoperative pain in patients undergoing bunionectomy. Most analysts who track Insys Therapeutics are of the opinion that the stock undervalued, as it is trading at a forward P/E of 15.06 and a price-to-book multiple of 3.92, especially when one takes into account the strong fundamentals of the company and the FDA approval of its new drug ‘Syndros’, which has the potential to double the revenue of the company in the coming years.

#1 GW Pharmaceuticals PLC- ADR (NASDAQ:GWPH)

– Hedge Funds with Long Positions (as of June 30): 17

– Value of Hedge Funds’ Holdings (as of June 30): $394.7 Million

GW Pharmaceuticals PLC- ADR (NASDAQ:GWPH) was also held by 17 hedge funds in our system at the end of the second quarter, and the aggregate value of their holdings in the stock jumped by over 100% during the quarter. It is also the only stock in this list that is trading in the green this year, being up by 44%. Shares jumped in March after the company announced positive results from a Phase 3 clinical trial assessing its drug, Epidiolex (cannabidiol), and then again more recently on rumors that the company is working with an investment bank after receiving takeover proposals from unnamed entities. Even though GW Pharmaceuticals PLC- ADR (NASDAQ:GWPH) hasn’t yet commented on the takeover rumors, some analysts are skeptical about them. The reason for their skepticism arises from the fact that in July, the company completed a secondary offering of 3.22 million American Depositary Shares (ADSs) and the lock-up period for its executives to sell their shares following the completion of the secondary offering ends in mid-October. According to those analysts, the takeover rumor could just be an attempt by someone who isn’t subject to the lock-up period to create a liquidity event in order to offload his or her shares before the lock-up period expires. On September 8, analysts at Cantor Fitzgerald reiterated their ‘Buy’ rating on GW Pharmaceuticals’ stock and set a price target of $165 on it, suggesting upside potential of over 65%.

Disclosure: None