How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding Ocuphire Pharma, Inc. (NASDAQ:OCUP).
Is OCUP a good stock to buy? Investors who are in the know were turning bullish. The number of bullish hedge fund bets inched up by 3 lately. Ocuphire Pharma, Inc. (NASDAQ:OCUP) was in 4 hedge funds’ portfolios at the end of the first quarter of 2021. The all time high for this statistic was 3. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that OCUP isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings). There were 1 hedge funds in our database with OCUP positions at the end of the fourth quarter.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 S&P 500 ETFs by more than 115 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.
Israel Englander of Millennium Management
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, an activist hedge fund wants to buy this $27 biotech stock for $50. So, we recommended a long position to our monthly premium newsletter subscribers. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Keeping this in mind we’re going to take a look at the new hedge fund action surrounding Ocuphire Pharma, Inc. (NASDAQ:OCUP).
Do Hedge Funds Think OCUP Is A Good Stock To Buy Now?
At the end of the first quarter, a total of 4 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 300% from the previous quarter. By comparison, 1 hedge funds held shares or bullish call options in OCUP a year ago. So, let’s check out 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, Ikarian Capital, managed by Neil Shahrestani, holds the biggest position in Ocuphire Pharma, Inc. (NASDAQ:OCUP). Ikarian Capital has a $0.7 million position in the stock, comprising less than 0.1%% of its 13F portfolio. The second most bullish fund manager is Renaissance Technologies, which holds a $0.7 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Some other members of the smart money that are bullish consist of Efrem Kamen’s Pura Vida Investments, Israel Englander’s Millennium Management and . In terms of the portfolio weights assigned to each position Ikarian Capital allocated the biggest weight to Ocuphire Pharma, Inc. (NASDAQ:OCUP), around 0.02% of its 13F portfolio. Pura Vida Investments is also relatively very bullish on the stock, setting aside 0.01 percent of its 13F equity portfolio to OCUP.
As industrywide interest jumped, some big names were leading the bulls’ herd. Ikarian Capital, managed by Neil Shahrestani, initiated the largest position in Ocuphire Pharma, Inc. (NASDAQ:OCUP). Ikarian Capital had $0.7 million invested in the company at the end of the quarter. Efrem Kamen’s Pura Vida Investments also made a $0.3 million investment in the stock during the quarter. The only other fund with a new position in the stock is Israel Englander’s Millennium Management.
Let’s now take a look at hedge fund activity in other stocks similar to Ocuphire Pharma, Inc. (NASDAQ:OCUP). These stocks are Monaker Group, Inc. (NASDAQ:MKGI), Genetic Technologies Limited (NASDAQ:GENE), BioCardia, Inc. (NASDAQ:BCDA), Hennessy Advisors, Inc. (NASDAQ:HNNA), Sensus Healthcare, Inc. (NASDAQ:SRTS), AMCON Distributing Co. (NYSE:DIT), and Yield10 Bioscience, Inc. (NASDAQ:YTEN). This group of stocks’ market values match OCUP’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| MKGI | 1 | 74 | -1 |
| GENE | 2 | 480 | 1 |
| BCDA | 4 | 6970 | 2 |
| HNNA | 2 | 1412 | 0 |
| SRTS | 3 | 1332 | 1 |
| DIT | 1 | 1259 | 0 |
| YTEN | 7 | 7187 | 5 |
| Average | 2.9 | 2673 | 1.1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 2.9 hedge funds with bullish positions and the average amount invested in these stocks was $3 million. That figure was $2 million in OCUP’s case. Yield10 Bioscience, Inc. (NASDAQ:YTEN) is the most popular stock in this table. On the other hand Monaker Group, Inc. (NASDAQ:MKGI) is the least popular one with only 1 bullish hedge fund positions. Ocuphire Pharma, Inc. (NASDAQ:OCUP) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for OCUP is 63. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 17.2% in 2021 through June 11th and beat the market again by 3.3 percentage points. Unfortunately OCUP wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on OCUP were disappointed as the stock returned -6.5% since the end of March (through 6/11) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.
Follow Opus Genetics Inc. (NYSEMKT:IRD)
Follow Opus Genetics Inc. (NYSEMKT:IRD)
Disclosure: None. This article was originally published at Insider Monkey.