Looking for high-potential stocks? Just follow the big players within the hedge fund industry. Why should you do so? Let’s take a brief look at what statistics have to say about hedge funds’ stock picking abilities to illustrate. The Standard and Poor’s 500 Index returned approximately 7.6% in the 12 months ending November 21, with more than 51% of the stocks in the index failing to beat the benchmark. Therefore, the odds that one will pin down a winner by randomly picking a stock are less than the odds in a fair coin-tossing game. Conversely, best performing hedge funds’ 30 preferred mid-cap stocks generated a return of 18% during the same 12-month period. Coincidence? It might happen to be so, but it is unlikely. Our research covering a 17-year period indicates that hedge funds’ stock picks generate superior risk-adjusted returns. That’s why we believe it is wise to check hedge fund activity before you invest your time or your savings on a stock like NewLink Genetics Corp (NASDAQ:NLNK).
Is NewLink Genetics Corp (NASDAQ:NLNK) a buy here? Prominent investors seem to be getting less bullish. The number of bullish hedge fund bets that are revealed through the 13F filings inched down by one during the third quarter and there were 12 hedge funds in our database with NLNK holdings at the end of September. At the end of this article we will also compare NLNK to other stocks including Winmark Corporation (NASDAQ:WINA), La Jolla Pharmaceutical Company (NASDAQ:LJPC), and Sun Bancorp, Inc. (NASDAQ:SNBC) to get a better sense of its popularity.
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Keeping this in mind, let’s take a look at the latest action surrounding NewLink Genetics Corp (NASDAQ:NLNK).
How are hedge funds trading NewLink Genetics Corp (NASDAQ:NLNK)?
Heading into the fourth quarter of 2016, a total of 12 of the hedge funds tracked by Insider Monkey were bullish on this stock, down by 8% from the second quarter of 2016. The graph below displays the number of hedge funds with bullish position in NLNK over the last five quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Of the funds tracked by Insider Monkey, Samuel Isaly’s OrbiMed Advisors has the biggest position in NewLink Genetics Corp (NASDAQ:NLNK), worth close to $29.1 million, comprising 0.3% of its total 13F portfolio. On OrbiMed Advisors’s heels is Millennium Management, one of the 10 largest hedge funds in the world, with a $5.6 million position; the fund has less than 0.1% of its 13F portfolio invested in the stock. Remaining professional money managers with similar optimism include Jim Simons’ Renaissance Technologies, and Principal Global Investors’ Columbus Circle Investors. 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.
Now that we’ve mentioned the most bullish investors, let’s also take a look at some funds that sold off their entire stakes in the stock during the third quarter. Intriguingly, First Eagle Investment Management sold off the largest stake of all the hedgies monitored by Insider Monkey, worth close to $24.6 million in stock. Ken Griffin’s fund, Citadel Investment Group, also sold off its call options, about $0.7 million worth.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as NewLink Genetics Corp (NASDAQ:NLNK) but similarly valued. We will take a look at Winmark Corporation (NASDAQ:WINA), La Jolla Pharmaceutical Company (NASDAQ:LJPC), Sun Bancorp, Inc. /NJ (NASDAQ:SNBC), and Park Sterling Bank (NASDAQ:PSTB). All of these stocks’ market caps resemble NLNK’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| WINA | 3 | 62096 | 0 |
| LJPC | 10 | 156944 | 1 |
| SNBC | 4 | 128657 | -2 |
| PSTB | 13 | 41389 | -1 |
As you can see these stocks had an average of eight hedge funds with bullish positions and the average amount invested in these stocks was $97 million. That figure was $52 million in NLNK’s case. Park Sterling Bank (NASDAQ:PSTB) is the most popular stock in this table. On the other hand Winmark Corporation (NASDAQ:WINA) is the least popular one with only three bullish hedge fund positions. NewLink Genetics Corp (NASDAQ:NLNK) 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 Park Sterling Bank (NASDAQ:PSTB) might be a better candidate to consider taking a long position in.
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Disclosure: none
