Investing in hedge funds can bring large profits, but it’s not for everybody, since hedge funds are available only for high-net-worth individuals. They generate significant returns for investors to justify their large fees and they allocate a lot of time and employ a complex analysis to determine the best stocks to invest in. A particularly interesting group of stocks that hedge funds like is the small-caps. The huge amount of capital does not allow hedge funds to invest a lot in small-caps, but our research showed that their most popular small-cap ideas are less efficiently priced and generate stronger returns than their large- and mega-cap picks and the broader market. That is why we follow the hedge fund activity in the small-cap space.
Is Intec Pharma Ltd (NASDAQ:NTEC) undervalued? The stock started trading in August and captured the attention of only five investors. 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 Harvest Natural Resources, Inc. (NYSE:HNR), TheStreet, Inc. (NASDAQ:TST), and GigOptix Inc (NYSEAMEX:GIG) to gather more data points.
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In the eyes of most investors, hedge funds are assumed to be unimportant, old investment tools of years past. While there are over an 8000 funds with their doors open at the moment, We choose to focus on the masters of this group, approximately 700 funds. These money managers watch over bulk of the smart money’s total capital, and by observing their best investments, Insider Monkey has unearthed various investment strategies that have historically outrun Mr. Market. Insider Monkey’s small-cap hedge fund strategy outrun the S&P 500 index by 12 percentage points per year for a decade in their back tests.
Keeping this in mind, let’s review the recent action regarding Intec Pharma Ltd (NASDAQ:NTEC).
Hedge fund activity in Intec Pharma Ltd (NASDAQ:NTEC)
According to Insider Monkey’s hedge fund database, Bihua Chen’s Cormorant Asset Management has the biggest position in Intec Pharma Ltd (NASDAQ:NTEC), worth close to $4.5 million, accounting for 0.7% of its total 13F portfolio. On Cormorant Asset Management’s heels is Opaleye Management, managed by James A. Silverman, which holds a $3.5 million position; 1.7% of its 13F portfolio is allocated to the company. Remaining hedge funds and institutional investors that are bullish include Hal Mintz’s Sabby Capital, Joseph Edelman’s Perceptive Advisors, and Nathan Fischel’s DAFNA Capital Management.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Intec Pharma Ltd (NASDAQ:NTEC) but similarly valued. We will take a look at Harvest Natural Resources, Inc. (NYSE:HNR), TheStreet, Inc. (NASDAQ:TST), GigOptix Inc (NYSEAMEX:GIG), and Lombard Medical Inc (NASDAQ:EVAR). This group of stocks’ market values match NTEC’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| HNR | 7 | 5239 | -3 |
| TST | 7 | 15625 | 0 |
| GIG | 7 | 8561 | 2 |
| EVAR | 4 | 4534 | 0 |
As you can see these stocks had an average of 6 hedge funds with bullish positions and the average amount invested in these stocks was $8 million. That figure was $14 million in NTEC’s case. Harvest Natural Resources, Inc. (NYSE:HNR) is the most popular stock in this table. On the other hand Lombard Medical Inc (NASDAQ:EVAR) is the least popular one with only 4 bullish hedge fund positions. Intec Pharma Ltd (NASDAQ:NTEC) is not the least popular stock in this group, but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard HNR might be a better candidate to consider a long position.