Hedge funds run by legendary names like Nelson Peltz and David Tepper make billions of dollars a year for themselves and their super-rich accredited investors (you’ve got to have a minimum of $1 million liquid to invest in a hedge fund) by spending enormous resources on analyzing and uncovering data about small-cap stocks that the big brokerage houses don’t follow. Small caps are where they can generate significant out-performance. These stocks have been on a tear since the end of June, outperforming large-cap index funds by more than 10 percentage points. That’s why we pay special attention to hedge fund activity in these stocks.
Is ONS a good stock to buy according to hedge funds? Oncobiologics Inc (NASDAQ:ONS) was in 7 hedge funds’ portfolios at the end of the third quarter of 2016. ONS has seen a decrease in hedge fund interest in recent months. There were 8 hedge funds in our database with ONS holdings 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 magicJack VocalTec Ltd (NASDAQ:CALL), Ashford Inc (NYSEMKT:AINC), and Five Star Quality Care, Inc. (NYSE:FVE) to gather more data points.
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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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With all of this in mind, let’s check out the recent action encompassing Oncobiologics Inc (NASDAQ:ONS).
Hedge fund activity in Oncobiologics Inc (NASDAQ:ONS)
Heading into the fourth quarter of 2016, a total of 7 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -13% from the second quarter of 2016. On the other hand, there were a total of 0 hedge funds with a bullish position in ONS at the beginning of this year. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
When looking at the institutional investors followed by Insider Monkey, Sabby Capital, led by Hal Mintz, holds the biggest position in Oncobiologics Inc (NASDAQ:ONS). Sabby Capital has a $9.6 million position in the stock, comprising 0.4% of its 13F portfolio. Coming in second is Perceptive Advisors, led by Joseph Edelman, which holds a $5.3 million position; the fund has 0.3% of its 13F portfolio invested in the stock. Remaining peers that are bullish encompass Bihua Chen’s Cormorant Asset Management, Behzad Aghazadeh’s venBio Select Advisor and Hal Mintz’s Sabby 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.
Judging by the fact that Oncobiologics Inc (NASDAQ:ONS) has experienced declining sentiment from the smart money, it’s safe to say that there was a specific group of fund managers who were dropping their full holdings last quarter. Interestingly, Sander Gerber’s Hudson Bay Capital Management cut the biggest stake of all the investors followed by Insider Monkey, worth about $0.2 million in stock, and Sander Gerber’s Hudson Bay Capital Management was right behind this move, as the fund dumped about $0 million worth of shares.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Oncobiologics Inc (NASDAQ:ONS) but similarly valued. We will take a look at magicJack VocalTec Ltd (NASDAQ:CALL), Ashford Inc (NYSEMKT:AINC), Five Star Quality Care, Inc. (NYSE:FVE), and Eiger Biopharmaceuticals Inc (NASDAQ:EIGR). This group of stocks’ market valuations are similar to ONS’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CALL | 6 | 5944 | -2 |
| AINC | 4 | 10454 | -1 |
| FVE | 8 | 15228 | -1 |
| EIGR | 5 | 14312 | 0 |
As you can see these stocks had an average of 5.75 hedge funds with bullish positions and the average amount invested in these stocks was $11 million. That figure was $28 million in ONS’s case. Five Star Quality Care, Inc. (NYSE:FVE) is the most popular stock in this table. On the other hand Ashford Inc (NYSEMKT:AINC) is the least popular one with only 4 bullish hedge fund positions. Oncobiologics Inc (NASDAQ:ONS) 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 FVE might be a better candidate to consider taking a long position in.