Like everyone else, elite investors make mistakes. Some of their top consensus picks, such as Micron and Anadarko Petroleum, have not done well during the last 12 months ending in October due to various reasons. Nevertheless, the data show elite investors’ consensus picks have done well on average. The top 30 S&P 500 stocks among hedge funds at the end of September 2014 yielded an average return of 9.5% during the last four quarters ending in October and sixty three percent of these 30 stocks outperformed the market. S&P 500 Index returned only 5.2% during the same period and less than 49% of its constituents managed to beat this return. Because their consensus picks have done well, we pay attention to what elite funds think before doing extensive research on a stock. In this article, we take a closer look at Neothetics Inc (NASDAQ:NEOT) from the perspective of those elite funds.
Neothetics Inc (NASDAQ:NEOT) has experienced a decrease in hedge fund sentiment of late. At the end of this article we will also compare NEOT to other stocks, including Amber Road Inc (NYSE:AMBR), Alaska Communications Systems Group Inc (NASDAQ:ALSK), and ASB Bancorp Inc (NASDAQ:ASBB) to get a better sense of its popularity.
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In the 21st century investor’s toolkit there are numerous formulas stock market investors employ to analyze their holdings. Some of the most innovative formulas are hedge fund and insider trading activity. We have shown that, historically, those who follow the top picks of the elite money managers can outclass the broader indices by a superb amount (see the details here).
With all of this in mind, let’s view the recent action regarding Neothetics Inc (NASDAQ:NEOT).
How are hedge funds trading Neothetics Inc (NASDAQ:NEOT)?
Heading into Q4, a total of 4 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -33% from the previous quarter. With hedgies’ positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were upping their holdings considerably (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Thomas Steyer’s Farallon Capital has the largest position in Neothetics Inc (NASDAQ:NEOT), worth close to $1 million, corresponding to less than 0.1%% of its total 13F portfolio. Sitting at the No. 2 spot is Mitchell Blutt of Consonance Capital Management, with a $1 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Other peers that hold long positions contain Anand Parekh’s Alyeska Investment Group, and Paul Orlin and Alex Porter’s Amici Capital.
Because Neothetics Inc (NASDAQ:NEOT) has witnessed falling interest from the aggregate hedge fund industry, it’s easy to see that there was a specific group of money managers that decided to sell off their positions entirely heading into Q4. Intriguingly, Nathan Fischel’s DAFNA Capital Management cut the largest stake of the 700 funds monitored by Insider Monkey, valued at about $1.7 million, and Ken Greenberg and David Kim’s Ghost Tree Capital was right behind this move, as the fund sold off about $0.4 million worth of shares. These bearish behaviors are important to note, as aggregate hedge fund interest fell by 2 funds heading into Q4.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Neothetics Inc (NASDAQ:NEOT) but similarly valued. We will take a look at Amber Road Inc (NYSE:AMBR), Alaska Communications Systems Group Inc (NASDAQ:ALSK), ASB Bancorp Inc (NASDAQ:ASBB), and PC Tel Inc (NASDAQ:PCTI). All of these stocks’ market caps are similar to NEOT’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| AMBR | 7 | 12796 | 0 |
| ALSK | 6 | 3293 | 0 |
| ASBB | 4 | 16152 | 0 |
| PCTI | 6 | 25771 | -1 |
As you can see these stocks had an average of 6 hedge funds with bullish positions and the average amount invested in these stocks was $15 million, which is higher than the $4 million in NEOT’s case. Amber Road Inc (NYSE:AMBR) is the most popular stock in this table, while ASB Bancorp Inc (NASDAQ:ASBB) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks Neothetics Inc (NASDAQ:NEOT) is even less popular than ASBB. Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case more research is warranted.