Investing in hedge funds can bring large profits, but it’s not for everybody, since hedge funds are available only for high-net-worth individuals. They generate significant returns for investors to justify their large fees and they allocate a lot of time and employ a complex analysis to determine the best stocks to invest in. A particularly interesting group of stocks that hedge funds like is the small-caps. The huge amount of capital does not allow hedge funds to invest a lot in small-caps, but our research showed that their most popular small-cap ideas are less efficiently priced and generate stronger returns than their large- and mega-cap picks and the broader market. That is why we follow the hedge fund activity in the small-cap space.
Is Sunesis Pharmaceuticals, Inc. (NASDAQ:SNSS) undervalued? The smart money is unambiguously selling. The number of bullish hedge fund positions that are disclosed in regulatory 13F filings retreated by 4 lately. There were 11 hedge funds in our database with SNSS 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 Calithera Biosciences Inc (NASDAQ:CALA), Perceptron, Inc. (NASDAQ:PRCP), and Innodata Inc (NASDAQ:INOD) to gather more data points.
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We care about hedge fund sentiment because historically hedge funds’ stock picks delivered strong risk adjusted returns. There are certain segments of the market where hedge funds’ stock picks performed much better than its benchmarks. For instance, the 30 most popular mid-cap stocks among the best performing hedge funds returned 18% over the last 12 months outpacing S&P 500 Index by more than 10 percentage points. We developed this strategy 2.5 years ago and started sharing its picks in our quarterly newsletter. It bested the S&P 500 Index ETFs by delivering a solid 39% vs. 22% gain for its benchmarks.
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With all of this in mind, we’re going to go over the key action regarding Sunesis Pharmaceuticals, Inc. (NASDAQ:SNSS).
What does the smart money think about Sunesis Pharmaceuticals, Inc. (NASDAQ:SNSS)?
At Q3’s end, a total of 7 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -36% from one quarter earlier. On the other hand, there were a total of 8 hedge funds with a bullish position in SNSS at the beginning of this year. With hedgies’ capital changing hands, there exists an “upper tier” of key hedge fund managers who were upping their stakes substantially (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, William Leland Edwards’s Palo Alto Investors has the number one position in Sunesis Pharmaceuticals, Inc. (NASDAQ:SNSS), worth close to $5.1 million, amounting to 0.3% of its total 13F portfolio. On Palo Alto Investors’s heels is Jeffrey Jay and David Kroin of Great Point Partners, with a $4.6 million position; the fund has 1.2% of its 13F portfolio invested in the stock. Remaining hedge funds and institutional investors with similar optimism contain Julian Baker and Felix Baker’s Baker Bros. Advisors, Mark Lampert’s Biotechnology Value Fund / BVF Inc and Richard Driehaus’s Driehaus 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.
Due to the fact that Sunesis Pharmaceuticals, Inc. (NASDAQ:SNSS) has experienced falling interest from the smart money, we can see that there lies a certain “tier” of fund managers that elected to cut their positions entirely by the end of the third quarter. It’s worth mentioning that Jeffrey Jay and David Kroin’s Great Point Partners said goodbye to the biggest investment of all the hedgies watched by Insider Monkey, comprising an estimated $4.5 million in stock. William Leland Edwards’s fund, Palo Alto Investors, also dropped its stock, about $3.8 million worth.
Let’s now take a look at hedge fund activity in other stocks similar to Sunesis Pharmaceuticals, Inc. (NASDAQ:SNSS). We will take a look at Calithera Biosciences Inc (NASDAQ:CALA), Perceptron, Inc. (NASDAQ:PRCP), Innodata Inc (NASDAQ:INOD), and InfuSystem Holdings, Inc. (NYSEAMEX:INFU). This group of stocks’ market values are closest to SNSS’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CALA | 6 | 12162 | -2 |
| PRCP | 4 | 25867 | -1 |
| INOD | 4 | 3218 | 1 |
| INFU | 3 | 5064 | 0 |
As you can see these stocks had an average of 4.25 hedge funds with bullish positions and the average amount invested in these stocks was $12 million. That figure was $18 million in SNSS’s case. Calithera Biosciences Inc (NASDAQ:CALA) is the most popular stock in this table. On the other hand InfuSystem Holdings, Inc. (NYSEAMEX:INFU) is the least popular one with only 3 bullish hedge fund positions. Compared to these stocks Sunesis Pharmaceuticals, Inc. (NASDAQ:SNSS) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.
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