You probably know from experience that there is not as much information on small-cap companies as there is on large companies. Of course, this makes it really hard and difficult for individual investors to make proper and accurate analysis of certain small-cap companies. However, well-known and successful hedge fund managers like Jeff Ubben, George Soros and Seth Klarman hold the necessary resources and abilities to conduct an extensive stock analysis on small-cap stocks, which enable them to make millions of dollars by identifying potential winners within the small-cap galaxy of stocks. This represents the main reason why Insider Monkey takes notice of the hedge fund activity in these overlooked stocks.
Is MEI Pharma Inc (NASDAQ:MEIP) an excellent investment right now? Money managers are selling. The number of long hedge fund bets decreased by 1 recently. Our calculations also showed that MEIP isn’t among the 30 most popular stocks among hedge funds.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
We’re going to take a look at the new hedge fund action surrounding MEI Pharma Inc (NASDAQ:MEIP).
Hedge fund activity in MEI Pharma Inc (NASDAQ:MEIP)
At Q1’s end, a total of 15 of the hedge funds tracked by Insider Monkey were long this stock, a change of -6% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in MEIP over the last 15 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Vivo Capital was the largest shareholder of MEI Pharma Inc (NASDAQ:MEIP), with a stake worth $17.7 million reported as of the end of March. Trailing Vivo Capital was Perceptive Advisors, which amassed a stake valued at $13.5 million. Biotechnology Value Fund / BVF Inc, Sio Capital, and Renaissance Technologies were also very fond of the stock, giving the stock large weights in their portfolios.
Due to the fact that MEI Pharma Inc (NASDAQ:MEIP) has faced bearish sentiment from the aggregate hedge fund industry, it’s easy to see that there lies a certain “tier” of fund managers that elected to cut their full holdings by the end of the third quarter. Intriguingly, Frederick DiSanto’s Ancora Advisors dumped the largest investment of all the hedgies watched by Insider Monkey, worth close to $0.3 million in stock, and Philip Hempleman’s Ardsley Partners was right behind this move, as the fund said goodbye to about $0.1 million worth. These transactions are interesting, as aggregate hedge fund interest was cut by 1 funds by the end of the third quarter.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as MEI Pharma Inc (NASDAQ:MEIP) but similarly valued. These stocks are Twin Disc, Incorporated (NASDAQ:TWIN), Tiptree Inc. (NASDAQ:TIPT), Provident Bancorp, Inc. (NASDAQ:PVBC), and IntriCon Corporation (NASDAQ:IIN). This group of stocks’ market caps resemble MEIP’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| TWIN | 5 | 31421 | -2 |
| TIPT | 5 | 3277 | 2 |
| PVBC | 2 | 6736 | 0 |
| IIN | 14 | 39899 | 2 |
| Average | 6.5 | 20333 | 0.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 6.5 hedge funds with bullish positions and the average amount invested in these stocks was $20 million. That figure was $60 million in MEIP’s case. IntriCon Corporation (NASDAQ:IIN) is the most popular stock in this table. On the other hand Provident Bancorp, Inc. (NASDAQ:PVBC) is the least popular one with only 2 bullish hedge fund positions. Compared to these stocks MEI Pharma Inc (NASDAQ:MEIP) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. Unfortunately MEIP wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on MEIP were disappointed as the stock returned -15.3% during the same period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 13 of these stocks already outperformed the market in Q2.
Disclosure: None. This article was originally published at Insider Monkey.
