We have been waiting for this for a year and finally the third quarter ended up showing a nice bump in the performance of small-cap stocks. Both the S&P 500 and Russell 2000 were up since the end of the second quarter, but small-cap stocks outperformed the large-cap stocks by double digits. This is important for hedge funds, which are big supporters of small-cap stocks, because their investors started pulling some of their capital out due to poor recent performance. It is very likely that equity hedge funds will deliver better risk adjusted returns in the second half of this year. In this article we are going to look at how this recent market trend affected the sentiment of hedge funds towards Dipexium Pharmaceuticals Inc (NASDAQ:DPRX) , and what that likely means for the prospects of the company and its stock.
Dipexium Pharmaceuticals Inc (NASDAQ:DPRX) shareholders have witnessed a decrease in hedge fund sentiment lately. There were 8 hedge funds in our database with DPRX holdings at the end of the previous quarter. 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 Shore Bancshares, Inc. (NASDAQ:SHBI), PROVIDENT BANCORP INC (NASDAQ:PVBC), and Timmins Gold Corp (NYSEMKT:TGD) to gather more data points.
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Now, we’re going to take a look at the fresh action surrounding Dipexium Pharmaceuticals Inc (NASDAQ:DPRX).
How are hedge funds trading Dipexium Pharmaceuticals Inc (NASDAQ:DPRX)?
At Q3’s end, a total of 7 of the hedge funds tracked by Insider Monkey held long positions in this stock, a decline of 13% from the previous quarter. By comparison, 9 hedge funds held shares or bullish call options in DPRX heading into this year. With hedgies’ positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Mark Kingdon’s Kingdon Capital has the most valuable position in Dipexium Pharmaceuticals Inc (NASDAQ:DPRX), worth close to $13.7 million. The second most bullish fund manager is Jason Karp’s Tourbillon Capital Partners which holds a $3.4 million position. Remaining peers with similar optimism contain Ari Zweiman’s 683 Capital Partners, Jeffrey Jay and David Kroin’s Great Point Partners and Jeffrey E. Eberwein’s Lone Star Value Management. We should note that 683 Capital Partners is 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.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Broadfin Capital. One hedge fund selling its entire position doesn’t always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don’t think this is the case in this case because none of the 700+ hedge funds tracked by Insider Monkey identified DPRX as a viable investment and initiated a position in the stock.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Dipexium Pharmaceuticals Inc (NASDAQ:DPRX) but similarly valued. We will take a look at Shore Bancshares, Inc. (NASDAQ:SHBI), PROVIDENT BANCORP INC (NASDAQ:PVBC), Timmins Gold Corp (NYSEMKT:TGD), and Performant Financial Corp (NASDAQ:PFMT). All of these stocks’ market caps are closest to DPRX’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SHBI | 5 | 11186 | 0 |
| PVBC | 3 | 7388 | 0 |
| TGD | 6 | 5557 | 2 |
| PFMT | 4 | 15818 | 1 |
As you can see these stocks had an average of 4 hedge funds with bullish positions and the average amount invested in these stocks was $10 million. That figure was $26 million in DPRX’s case. Timmins Gold Corp (NYSEMKT:TGD) is the most popular stock in this table. On the other hand PROVIDENT BANCORP INC (NASDAQ:PVBC) is the least popular one with only 3 bullish hedge fund positions. Compared to these stocks Dipexium Pharmaceuticals Inc (NASDAQ:DPRX) 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
