Legendary investors such as Leon Cooperman and Seth Klarman earn enormous amounts of money for themselves and their investors by doing in-depth research on small-cap stocks that big brokerage houses don’t publish. Small cap stocks -especially when they are screened well- can generate substantial outperformance versus a boring index fund. That’s why we analyze the activity of those successful funds in these small-cap stocks. In the following paragraphs, we analyze Loxo Oncology Inc (NASDAQ:LOXO) from the perspective of those successful funds.
Is Loxo Oncology Inc (NASDAQ:LOXO) a bargain? Prominent investors are altogether in a bullish mood. The number of bullish hedge fund positions advanced by 1 in recent months. There were 10 hedge funds in our database with LOXO positions at the end of the previous quarter. At the end of this article we will also compare LOXO to other stocks including Modine Manufacturing Co. (NYSE:MOD), Amarin Corporation plc (ADR) (NASDAQ:AMRN), and TETRA Technologies, Inc. (NYSE:TTI) to get a better sense of its popularity.
Follow Loxo Oncology Inc. (NASDAQ:LOXO)
Follow Loxo Oncology Inc. (NASDAQ:LOXO)
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.
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Keeping this in mind, let’s check out the recent action encompassing Loxo Oncology Inc (NASDAQ:LOXO).
How have hedgies been trading Loxo Oncology Inc (NASDAQ:LOXO)?
At Q3’s end, a total of 11 of the hedge funds tracked by Insider Monkey held long positions in this stock, a growth of 10% from the second quarter of 2016. The graph below displays the number of hedge funds with bullish position in LOXO over the last 5 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Dennis Purcell’s Aisling Capital has the biggest position in Loxo Oncology Inc (NASDAQ:LOXO), worth close to $105.5 million, amounting to 21.7% of its total 13F portfolio. Coming in second is OrbiMed Advisors, led by Samuel Isaly, which holds a $45.2 million position; the fund has 0.5% of its 13F portfolio invested in the stock. Remaining members of the smart money that are bullish comprise Phill Gross and Robert Atchinson’s Adage Capital Management, John Paulson’s Paulson & Co and Richard Driehaus’ Driehaus Capital. We should note that none of these hedge funds are 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.
As industrywide interest jumped, key money managers were leading the bulls’ herd. Opaleye Management, led by James A. Silverman, established the most outsized position in Loxo Oncology Inc (NASDAQ:LOXO). Opaleye Management had $2.9 million invested in the company at the end of the quarter.
Let’s also examine hedge fund activity in other stocks similar to Loxo Oncology Inc (NASDAQ:LOXO). We will take a look at Modine Manufacturing Co. (NYSE:MOD), Amarin Corporation plc (ADR) (NASDAQ:AMRN), TETRA Technologies, Inc. (NYSE:TTI), and Ashford Hospitality Trust, Inc. (NYSE:AHT). This group of stocks’ market values are closest to LOXO’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| MOD | 10 | 43734 | -1 |
| AMRN | 19 | 221721 | 7 |
| TTI | 17 | 67275 | -6 |
| AHT | 13 | 27968 | -1 |
As you can see these stocks had an average of 15 hedge funds with bullish positions and the average amount invested in these stocks was $90 million. That figure was $225 million in LOXO’s case. Amarin Corporation plc (ADR) (NASDAQ:AMRN) is the most popular stock in this table. On the other hand Modine Manufacturing Co. (NYSE:MOD) is the least popular one with only 10 bullish hedge fund positions. Loxo Oncology Inc (NASDAQ:LOXO) 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 AMRN might be a better candidate to consider taking a long position in.
Disclosure: None
