Billionaire hedge fund managers such as Steve Cohen and Stan Druckenmiller can generate millions or even billions of dollars every year by pinning down high-potential small-cap stocks and pouring cash into these candidates. Small-cap stocks are overlooked by most investors, brokerage houses, and financial services hubs, while the unlimited research abilities of the big players within the hedge fund industry can easily identify the undervalued and high-potential stocks that reside the ignored corners of equity markets. There are numerous small-cap stocks that have turned out to be great winners, which is one of the main reasons the Insider Monkey team pays close attention to the hedge fund activity in relation to these stocks.
In this article, we are going to take a closer look at Alcobra Ltd (NASDAQ:ADHD), which last quarter registered a slight decline in popularity among smart money investors in the Insider Monkey database. At the end of September, 14 funds held shares of Alcobra. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Stone Energy Corporation (NYSE:SGY), PB Bancorp Inc (NASDAQ:PBBI), and AVEO Pharmaceuticals, Inc. (NASDAQ:AVEO) to gather more data points.
We follow over 700 hedge funds and other institutional investors and by analyzing their quarterly 13F filings, we identify stocks that they are collectively bullish on and develop investment strategies based on this data. One strategy that outperformed the market over the last year involves selecting the 100 best-performing funds and identifying the 30 mid-cap stocks that they are collectively most bullish on. Over the past year, this strategy generated returns of 18%, topping the 8% gain registered by S&P 500 ETFs. We launched this strategy 2.5 years ago and it returned more than 39% since then, vs. 22% gain registered by the S&P 500 ETFs.
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With all of this in mind, let’s take a peek at the recent action regarding Alcobra Ltd (NASDAQ:ADHD).
How have hedgies been trading Alcobra Ltd (NASDAQ:ADHD)?
At the end of September, a total of 14 of the hedge funds tracked by Insider Monkey held long positions in Alcobra, versus 15 funds a quarter earlier. Below, you can check out the change in hedge fund sentiment towards ADHD over the last five quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
When looking at the institutional investors followed by Insider Monkey, Julian Baker and Felix Baker’s Baker Bros. Advisors has the most valuable position in Alcobra Ltd (NASDAQ:ADHD), worth close to $5.8 million, comprising 0.1% of its total 13F portfolio. The second most bullish fund manager is Broadfin Capital, led by Kevin Kotler, which holds a $5.1 million position; 0.5% of its 13F portfolio is allocated to the company. Other peers that hold long positions contain Peter Kolchinsky’s RA Capital Management, Fred Knoll’s Knoll Capital Management, and Anand Parekh’s Alyeska Investment Group. 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.
Judging by the fact that Alcobra Ltd (NASDAQ:ADHD) has sustained declining sentiment from the smart money, we can see that there exists a select few fund managers that slashed their entire stakes during the third quarter. At the top of the heap, Jeffrey Jay and David Kroin’s Great Point Partners sold off the biggest position of all the hedgies watched by Insider Monkey, totaling an estimated $6.4 million in stock. James E. Flynn’s fund, Deerfield Management, also said goodbye to its stock, about $4.8 million worth.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Alcobra Ltd (NASDAQ:ADHD) but similarly valued. These stocks are Stone Energy Corporation (NYSE:SGY), PB Bancorp Inc (NASDAQ:PBBI), AVEO Pharmaceuticals, Inc. (NASDAQ:AVEO), and Rentech, Inc. (NYSEAMEX:RTK). This group of stocks’ market valuations are similar to ADHD’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SGY | 4 | 2322 | -4 |
| PBBI | 3 | 3900 | 0 |
| AVEO | 8 | 7969 | -2 |
| RTK | 6 | 12533 | -1 |
As you can see these stocks had an average of just five funds with bullish positions and the average amount invested in these stocks was $7 million. That figure was $28 million in ADHD’s case. AVEO Pharmaceuticals, Inc. (NASDAQ:AVEO) is the most popular stock in this table. On the other hand PB Bancorp Inc (NASDAQ:PBBI) is the least popular one with only three funds holding shares. Compared to these stocks Alcobra Ltd (NASDAQ:ADHD) 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.
Disclosure: none
