Is MannKind Corporation (MNKD) Going to Burn These Hedge Funds?

Does MannKind Corporation (NASDAQ:MNKD) represent a good buying opportunity at the moment? Let’s briefly check the hedge fund sentiment towards the company. Hedge fund firms constantly search out bright intellectuals and highly-experienced employees and throw away millions of dollars on research activities, so it is no wonder why they tend to generate millions in profits each year. It is also true that some hedge fund players fail unconceivably on some occasions, but their stock picks have been generating superior risk-adjusted returns on average over the years.

MannKind Corporation (NASDAQ:MNKD) was in 11 hedge funds’ portfolios at the end of the third quarter of 2015. MNKD has experienced a decrease in support from the world’s most elite money managers lately. There were 13 hedge funds in our database with MNKD positions 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 G&K Services Inc (NASDAQ:GK), Main Street Capital Corporation (NYSE:MAIN), and Teekay Offshore Partners L.P. (NYSE:TOO) to gather more data points.

To the average investor, there are dozens of methods investors use to analyze their stock investments. A duo of the less known methods are hedge fund and insider trading signals. Our researchers have shown that, historically, those who follow the top picks of the best money managers can outperform the S&P 500 by a significant margin (see the details here).

Keeping this in mind, let’s take a peek at the key action regarding MannKind Corporation (NASDAQ:MNKD).

How have hedgies been trading MannKind Corporation (NASDAQ:MNKD)?

Heading into Q4, a total of 11 of the hedge funds tracked by Insider Monkey were long this stock, a change of -15% from the previous quarter. With the smart money’s sentiment swirling, there exists a few notable hedge fund managers who were upping their holdings significantly (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Greywolf Capital Management, managed by Jonathan Savitz, holds the number one position in MannKind Corporation (NASDAQ:MNKD). Greywolf Capital Management has a $29.1 million position in the stock, comprising 4.8% of its 13F portfolio. Coming in second is Sabby Capital, led by Hal Mintz, holding a $9.9 million call position; 0.4% of its 13F portfolio is allocated to the stock. Remaining professional money managers with similar optimism encompass Ken Griffin’s Citadel Investment Group, Daniel S. Och’s OZ Management and Murray Stahl’s Horizon Asset Management.

Since MannKind Corporation (NASDAQ:MNKD) has faced bearish sentiment from hedge fund managers, it’s easy to see that there exists a select few funds who were dropping their positions entirely by the end of the third quarter. Intriguingly, Kenneth Tropin’s Graham Capital Management dumped the biggest stake of the 700 funds monitored by Insider Monkey, comprising about $22.1 million in stock. Carl Goldsmith and Scott Klein’s fund, Beach Point Capital Management, also cut its stock, about $6.9 million worth. These transactions are important to note, as total hedge fund interest fell by 2 funds by the end of the third quarter.

Let’s now take a look at hedge fund activity in other stocks similar to MannKind Corporation (NASDAQ:MNKD). These stocks are G&K Services Inc (NASDAQ:GK), Main Street Capital Corporation (NYSE:MAIN), Teekay Offshore Partners L.P. (NYSE:TOO), and Kindred Healthcare, Inc. (NYSE:KND). This group of stocks’ market valuations resemble MNKD’s market valuation.

As you can see these stocks had an average of 14.5 hedge funds with bullish positions and the average amount invested in these stocks was $132 million, significantly higher than the $44 million figure in MNKD’s case. Kindred Healthcare, Inc. (NYSE:KND) is the most popular stock in this table. On the other hand Teekay Offshore Partners L.P. (NYSE:TOO) is the least popular one with only 6 bullish hedge fund positions. MannKind Corporation (NASDAQ:MNKD) 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 KND might be a better candidate to consider a long position.