Is Lion Biotechnologies Inc (LBIO) A Good Stock To Buy?

The elite funds run by legendary investors such as Dan Loeb and David Tepper make hundreds of millions of dollars for themselves and their investors by spending enormous resources doing research on small cap stocks that big investment banks don’t follow. Because of their pay structures, they have strong incentive to do the research necessary to beat the market. That’s why we pay close attention to what they think in small cap stocks. In this article, we take a closer look at Lion Biotechnologies Inc (NASDAQ:LBIO) from the perspective of those elite funds.

Lion Biotechnologies Inc (NASDAQ:LBIO) has experienced a decrease in activity from the world’s largest hedge funds recently. 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 Tetraphase Pharmaceuticals Inc (NASDAQ:TTPH), The York Water Company (NASDAQ:YORW), and Akarti Therapeutics PLC (ADR) (NASDAQ:AKTX) to gather more data points.

If you’d ask most shareholders, hedge funds are assumed to be worthless, outdated investment vehicles of yesteryear. While there are greater than 8000 funds trading today, Our researchers look at the upper echelon of this club, around 700 funds. These investment experts handle most of all hedge funds’ total asset base, and by shadowing their matchless picks, Insider Monkey has brought to light a few investment strategies that have historically outpaced the market. Insider Monkey’s small-cap hedge fund strategy defeated the S&P 500 index by 12 percentage points per year for a decade in their back tests.

Now, we’re going to review the latest action regarding Lion Biotechnologies Inc (NASDAQ:LBIO).

How are hedge funds trading Lion Biotechnologies Inc (NASDAQ:LBIO)?

Heading into Q4, a total of 16 of the hedge funds tracked by Insider Monkey were bullish on this stock, a drop of 27% from one quarter earlier. With hedgies’ positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).

Of the funds tracked by Insider Monkey, venBio Select Advisor, managed by Behzad Aghazadeh, holds the biggest position in Lion Biotechnologies Inc (NASDAQ:LBIO). The fund has an $18.3 million position in the stock, comprising 4.8% of its 13F portfolio. Coming in second is Perceptive Advisors, managed by Joseph Edelman, which holds a $17 million position; the fund has 1.4% of its 13F portfolio invested in the stock. Some other peers that are bullish consist of Kevin Kotler’s Broadfin Capital, Julian Baker and Felix Baker’s Baker Bros. Advisors and Daniel Gold’s QVT Financial.

Due to the fact that Lion Biotechnologies Inc (NASDAQ:LBIO) has experienced a decline in interest from the entirety of the hedge funds we track, it’s easy to see that there is a sect of hedgies who sold off their entire stakes heading into Q4. Interestingly, Jason Karp’s Tourbillon Capital Partners sold off the largest position of the “upper crust” of funds monitored by Insider Monkey, comprising close to $7 million in stock. Peter Muller’s fund, PDT Partners, also cut its stock, about $0.6 million worth of shares. These transactions are interesting, as total hedge fund interest dropped by 6 funds heading into Q4.

Let’s check out hedge fund activity in other stocks similar to Lion Biotechnologies Inc (NASDAQ:LBIO). These stocks are Tetraphase Pharmaceuticals Inc (NASDAQ:TTPH), The York Water Company (NASDAQ:YORW), Akarti Therapeutics PLC (ADR) (NASDAQ:AKTX), and Trinity Biotech plc (ADR) (NASDAQ:TRIB). This group of stocks’ market caps are closest to LBIO’s market cap.

As you can see these stocks had an average of 12 hedge funds with bullish positions and the average amount invested in these stocks was $38 million. That figure was $83 million in LBIO’s case. Trinity Biotech plc (ADR) (NASDAQ:TRIB) is the most popular stock in this table, while The York Water Company (NASDAQ:YORW) is at the other end of the specter with only 5 bullish hedge fund positions. Lion Biotechnologies Inc (NASDAQ:LBIO) is not the most popular stock in this group, but hedge fund interest is still above average. This is a slightly positive signal, but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard TRIB might be a better candidate to consider a long position.