Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors’ consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of La Jolla Pharmaceutical Company (NASDAQ:LJPC).
Is La Jolla Pharmaceutical Company (NASDAQ:LJPC) a bargain? The smart money is in a pessimistic mood. The number of long hedge fund bets were trimmed by 1 recently. Our calculations also showed that LJPC isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 58 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Kevin Kotler of Broadfin Capital
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out stocks recommended/scorned by legendary Bill Miller. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind let’s take a look at the latest hedge fund action surrounding La Jolla Pharmaceutical Company (NASDAQ:LJPC).
What have hedge funds been doing with La Jolla Pharmaceutical Company (NASDAQ:LJPC)?
At the end of the first quarter, a total of 5 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -17% from the previous quarter. On the other hand, there were a total of 13 hedge funds with a bullish position in LJPC a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Tang Capital Management was the largest shareholder of La Jolla Pharmaceutical Company (NASDAQ:LJPC), with a stake worth $33.9 million reported as of the end of September. Trailing Tang Capital Management was PDT Partners, which amassed a stake valued at $0.5 million. Citadel Investment Group, Citadel Investment Group, and Engineers Gate Manager were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Tang Capital Management allocated the biggest weight to La Jolla Pharmaceutical Company (NASDAQ:LJPC), around 4.77% of its 13F portfolio. PDT Partners is also relatively very bullish on the stock, setting aside 0.04 percent of its 13F equity portfolio to LJPC.
Seeing as La Jolla Pharmaceutical Company (NASDAQ:LJPC) has faced falling interest from the aggregate hedge fund industry, it’s easy to see that there lies a certain “tier” of money managers that elected to cut their full holdings last quarter. Interestingly, Kevin Kotler’s Broadfin Capital said goodbye to the largest investment of the “upper crust” of funds watched by Insider Monkey, comprising an estimated $10.6 million in stock. Anand Parekh’s fund, Alyeska Investment Group, also dropped its stock, about $2.5 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest dropped by 1 funds last quarter.
Let’s now take a look at hedge fund activity in other stocks similar to La Jolla Pharmaceutical Company (NASDAQ:LJPC). We will take a look at Citizens Holding Company (NASDAQ:CIZN), Earthstone Energy, Inc. (NYSE:ESTE), Riverview Bancorp, Inc. (NASDAQ:RVSB), and Era Group Inc (NYSE:ERA). This group of stocks’ market values resemble LJPC’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CIZN | 2 | 939 | 0 |
| ESTE | 3 | 2527 | -2 |
| RVSB | 11 | 5742 | 1 |
| ERA | 7 | 12528 | 0 |
| Average | 5.75 | 5434 | -0.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 5.75 hedge funds with bullish positions and the average amount invested in these stocks was $5 million. That figure was $35 million in LJPC’s case. Riverview Bancorp, Inc. (NASDAQ:RVSB) is the most popular stock in this table. On the other hand Citizens Holding Company (NASDAQ:CIZN) is the least popular one with only 2 bullish hedge fund positions. La Jolla Pharmaceutical Company (NASDAQ:LJPC) 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. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 8.3% in 2020 through the end of May and surpassed the market by 13.2 percentage points. Unfortunately LJPC wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); LJPC investors were disappointed as the stock returned 12.4% during the second quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.
