Is AMAG Pharmaceuticals, Inc. (AMAG) Going to Burn These Hedge Funds?

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.

AMAG Pharmaceuticals, Inc. (NASDAQ:AMAG) shares haven’t seen a lot of action during the fourth quarter. Overall, hedge fund sentiment was unchanged. The stock was in 19 hedge funds’ portfolios at the end of September. 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 Crocs, Inc. (NASDAQ:CROX), iKang Healthcare Group Inc (ADR) (NASDAQ:KANG), and Air Transport Services Group Inc. (NASDAQ:ATSG) to gather more data points.

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.

g-stockstudio/Shutterstock.com

With all of this in mind, we’re going to take a look at the recent action encompassing AMAG Pharmaceuticals, Inc. (NASDAQ:AMAG).

How are hedge funds trading AMAG Pharmaceuticals, Inc. (NASDAQ:AMAG)?

At Q3’s end, a total of 19 of the hedge funds tracked by Insider Monkey held long positions in this stock, unchanged from the previous quarter. With hedge funds’ sentiment swirling, there exists an “upper tier” of notable hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, William Leland Edwards’s Palo Alto Investors has the most valuable position in AMAG Pharmaceuticals, Inc. (NASDAQ:AMAG), worth close to $81.5 million, corresponding to 4.7% of its total 13F portfolio. Coming in second is Phill Gross and Robert Atchinson of Adage Capital Management, with a $54.4 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Other hedge funds and institutional investors that hold long positions consist of D. E. Shaw’s D E Shaw, Ross Margolies’s Stelliam Investment Management and Stephen DuBois’s Camber Capital Management.

Seeing as AMAG Pharmaceuticals, Inc. (NASDAQ:AMAG) has witnessed bearish sentiment from the aggregate hedge fund industry, it’s easy to see that there were a few money managers who sold off their entire stakes last quarter. It’s worth mentioning that Anders Hallberg and Carl Bennet’s HealthInvest Partners AB dropped the biggest stake of the “upper crust” of funds monitored by Insider Monkey, comprising close to $16.1 million in stock, and Jonathan Savitz’s Greywolf Capital Management was right behind this move, as the fund dropped about $15.8 million worth of AMAG shares. These transactions are intriguing to say the least, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s now review hedge fund activity in other stocks similar to AMAG Pharmaceuticals, Inc. (NASDAQ:AMAG). We will take a look at Crocs, Inc. (NASDAQ:CROX), iKang Healthcare Group Inc (ADR) (NASDAQ:KANG), Air Transport Services Group Inc. (NASDAQ:ATSG), and Denny’s Corporation (NASDAQ:DENN). This group of stocks’ market caps are similar to AMAG’s market cap.

As you can see these stocks had an average of 13 hedge funds with bullish positions and the average amount invested in these stocks was $108 million. That figure was $261 million in AMAG’s case. Air Transport Services Group Inc. (NASDAQ:ATSG) is the most popular stock in this table. On the other hand Crocs, Inc. (NASDAQ:CROX) is the least popular one with only 10 bullish hedge fund positions. Compared to these stocks AMAG Pharmaceuticals, Inc. (NASDAQ:AMAG) 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.