Out of thousands of stocks that are currently traded on the market, it is difficult to identify those that will really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of nearly 900 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has the potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about TRACON Pharmaceuticals Inc (NASDAQ:TCON).
TRACON Pharmaceuticals Inc (NASDAQ:TCON) was in 6 hedge funds’ portfolios at the end of the first quarter of 2021. The all time high for this statistic is 8. TCON investors should pay attention to a decrease in enthusiasm from smart money lately. There were 8 hedge funds in our database with TCON positions at the end of the fourth quarter. Our calculations also showed that TCON isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 206.8% since March 2017 and outperformed the S&P 500 ETFs by more than 115 percentage points (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
David Siegel of Two Sigma Advisors
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, an activist hedge fund owns nearly 40% of this $24 biotech stock and is trying to buy the rest for around $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. Now let’s take a gander at the key hedge fund action surrounding TRACON Pharmaceuticals Inc (NASDAQ:TCON).
Do Hedge Funds Think TCON Is A Good Stock To Buy Now?
At the end of March, a total of 6 of the hedge funds tracked by Insider Monkey were long this stock, a change of -25% from the fourth quarter of 2020. The graph below displays the number of hedge funds with bullish position in TCON over the last 23 quarters. With hedge funds’ sentiment swirling, there exists a few notable hedge fund managers who were boosting their holdings significantly (or already accumulated large positions).
More specifically, Ikarian Capital was the largest shareholder of TRACON Pharmaceuticals Inc (NASDAQ:TCON), with a stake worth $22.4 million reported as of the end of March. Trailing Ikarian Capital was Opaleye Management, which amassed a stake valued at $20.7 million. Two Sigma Advisors, Renaissance Technologies, and Millennium Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Opaleye Management allocated the biggest weight to TRACON Pharmaceuticals Inc (NASDAQ:TCON), around 3.04% of its 13F portfolio. Ikarian Capital is also relatively very bullish on the stock, earmarking 0.76 percent of its 13F equity portfolio to TCON.
Since TRACON Pharmaceuticals Inc (NASDAQ:TCON) has faced declining sentiment from the smart money, logic holds that there exists a select few funds who sold off their entire stakes heading into Q2. At the top of the heap, Ari Zweiman’s 683 Capital Partners dropped the largest position of the “upper crust” of funds monitored by Insider Monkey, valued at close to $0.9 million in stock, and Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors was right behind this move, as the fund said goodbye to about $0.5 million worth. These moves are important to note, as aggregate hedge fund interest fell by 2 funds heading into Q2.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as TRACON Pharmaceuticals Inc (NASDAQ:TCON) but similarly valued. These stocks are Salisbury Bancorp, Inc. (NASDAQ:SAL), inTEST Corporation (NASDAQ:INTT), Greenland Technologies Holding Corporation (NASDAQ:GTEC), 36Kr Holdings Inc. (NASDAQ:KRKR), Landmark Bancorp, Inc. (NASDAQ:LARK), Provident Financial Holdings, Inc. (NASDAQ:PROV), and Adamis Pharmaceuticals Corporation (NASDAQ:ADMP). This group of stocks’ market valuations are closest to TCON’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SAL | 1 | 640 | 1 |
| INTT | 4 | 17935 | 1 |
| GTEC | 1 | 539 | 0 |
| KRKR | 1 | 171 | 0 |
| LARK | 2 | 4823 | 0 |
| PROV | 1 | 6525 | 0 |
| ADMP | 3 | 1311 | 3 |
| Average | 1.9 | 4563 | 0.7 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 1.9 hedge funds with bullish positions and the average amount invested in these stocks was $5 million. That figure was $48 million in TCON’s case. inTEST Corporation (NASDAQ:INTT) is the most popular stock in this table. On the other hand Salisbury Bancorp, Inc. (NASDAQ:SAL) is the least popular one with only 1 bullish hedge fund positions. Compared to these stocks TRACON Pharmaceuticals Inc (NASDAQ:TCON) is more popular among hedge funds. Our overall hedge fund sentiment score for TCON is 75.5. 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. 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 19.3% in 2021 through June 25th and still beat the market by 4.8 percentage points. Unfortunately TCON wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on TCON were disappointed as the stock returned -13.4% since the end of the first quarter (through 6/25) 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 most of these stocks already outperformed the market since 2019.
Follow Tracon Pharmaceuticals Inc. (NASDAQ:TCON)
Follow Tracon Pharmaceuticals Inc. (NASDAQ:TCON)
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Disclosure: None. This article was originally published at Insider Monkey.
