Pain Therapeutics, Inc. (PTIE): Are Hedge Funds Right About This Stock?

Is Pain Therapeutics, Inc. (NASDAQ:PTIE) a buy, sell, or hold? The smart money is in a bearish mood. The number of long hedge fund positions were trimmed by 1 in recent months.

In the eyes of most shareholders, hedge funds are seen as underperforming, outdated investment tools of the past. While there are more than 8000 funds trading at present, we choose to focus on the aristocrats of this group, around 450 funds. It is widely believed that this group has its hands on the majority of all hedge funds’ total capital, and by tracking their best stock picks, we have discovered a number of investment strategies that have historically outperformed the S&P 500 index. Our small-cap hedge fund strategy outpaced the S&P 500 index by 18 percentage points annually for a decade in our back tests, and since we’ve began to sharing our picks with our subscribers at the end of August 2012, we have outpaced the S&P 500 index by 23.3 percentage points in 8 months (see all of our picks from August).

Equally as important, optimistic insider trading sentiment is a second way to parse down the stock market universe. There are lots of stimuli for an insider to get rid of shares of his or her company, but just one, very simple reason why they would buy. Many academic studies have demonstrated the useful potential of this strategy if shareholders know where to look (learn more here).

With all of this in mind, let’s take a glance at the latest action regarding Pain Therapeutics, Inc. (NASDAQ:PTIE).

What have hedge funds been doing with Pain Therapeutics, Inc. (NASDAQ:PTIE)?

Heading into Q2, a total of 10 of the hedge funds we track were bullish in this stock, a change of -9% from the first quarter. With hedge funds’ sentiment swirling, there exists a select group of noteworthy hedge fund managers who were upping their stakes substantially.

When looking at the hedgies we track, Jacob Gottlieb’s Visium Asset Management had the most valuable position in Pain Therapeutics, Inc. (NASDAQ:PTIE), worth close to $14.9 million, comprising 0.4% of its total 13F portfolio. Coming in second is Madison Street Partners, managed by Steven Owsley, which held a $6.5 million position; the fund has 6.7% of its 13F portfolio invested in the stock. Some other hedgies that hold long positions include Howard Guberman’s Gruss Asset Management, Jim Simons’s Renaissance Technologies and Jean-Marie Eveillard’s First Eagle Investment Management.

Because Pain Therapeutics, Inc. (NASDAQ:PTIE) has faced declining sentiment from the entirety of the hedge funds we track, logic holds that there lies a certain “tier” of hedge funds that elected to cut their positions entirely heading into Q2. It’s worth mentioning that Cliff Asness’s AQR Capital Management dropped the largest position of all the hedgies we monitor, comprising close to $0.1 million in stock. These transactions are important to note, as aggregate hedge fund interest dropped by 1 funds heading into Q2.

Insider trading activity in Pain Therapeutics, Inc. (NASDAQ:PTIE)

Insider purchases made by high-level executives is particularly usable when the company in focus has seen transactions within the past six months. Over the latest 180-day time period, Pain Therapeutics, Inc. (NASDAQ:PTIE) has experienced zero unique insiders buying, and zero insider sales (see the details of insider trades here).

Let’s also review hedge fund and insider activity in other stocks similar to Pain Therapeutics, Inc. (NASDAQ:PTIE). These stocks are Cytokinetics, Inc. (NASDAQ:CYTK), ArQule, Inc. (NASDAQ:ARQL), ZIOPHARM Oncology Inc. (NASDAQ:ZIOP), BioDelivery Sciences International, Inc. (NASDAQ:BDSI), and Amicus Therapeutics, Inc. (NASDAQ:FOLD). All of these stocks are in the biotechnology industry and their market caps are similar to PTIE’s market cap.