At Insider Monkey, we pore over the filings of nearly 750 top investment firms every quarter, a process we have now completed for the latest reporting period. The data we’ve gathered as a result gives us access to a wealth of collective knowledge based on these firms’ portfolio holdings as of September 30. In this article, we will use that wealth of knowledge to determine whether or not Flexion Therapeutics Inc (NASDAQ:FLXN) makes for a good investment right now.
Hedge fund interest in Flexion Therapeutics Inc (NASDAQ:FLXN) shares was flat at the end of last quarter. This is usually a negative indicator. At the end of this article we will also compare FLXN to other stocks including MYR Group Inc (NASDAQ:MYRG), WideOpenWest, Inc. (NYSE:WOW), and United Community Financial Corp (NASDAQ:UCFC) to get a better sense of its popularity.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
Bill Miller of Miller Value Partners
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds‘ buy/sell signals. Let’s review the fresh hedge fund action surrounding Flexion Therapeutics Inc (NASDAQ:FLXN).
How have hedgies been trading Flexion Therapeutics Inc (NASDAQ:FLXN)?
At the end of the third quarter, a total of 15 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the previous quarter. On the other hand, there were a total of 15 hedge funds with a bullish position in FLXN a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Bill Miller’s Miller Value Partners has the largest position in Flexion Therapeutics Inc (NASDAQ:FLXN), worth close to $71.5 million, corresponding to 2.9% of its total 13F portfolio. The second most bullish fund manager is Kingdon Capital, managed by Mark Kingdon, which holds a $13.5 million position; the fund has 1.6% of its 13F portfolio invested in the stock. Some other members of the smart money that hold long positions consist of Marc Majzner’s Clearline Capital, David Rosen’s Rubric Capital Management and David E. Shaw’s D E Shaw. In terms of the portfolio weights assigned to each position Clearline Capital allocated the biggest weight to Flexion Therapeutics Inc (NASDAQ:FLXN), around 4.98% of its 13F portfolio. Miller Value Partners is also relatively very bullish on the stock, dishing out 2.87 percent of its 13F equity portfolio to FLXN.
Judging by the fact that Flexion Therapeutics Inc (NASDAQ:FLXN) has faced falling interest from the aggregate hedge fund industry, it’s safe to say that there were a few funds who sold off their entire stakes by the end of the third quarter. At the top of the heap, Clint Carlson’s Carlson Capital dumped the largest stake of all the hedgies tracked by Insider Monkey, worth close to $3.3 million in stock, and Samuel Isaly’s OrbiMed Advisors was right behind this move, as the fund said goodbye to about $1.1 million worth. These transactions are important to note, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Flexion Therapeutics Inc (NASDAQ:FLXN) but similarly valued. We will take a look at MYR Group Inc (NASDAQ:MYRG), WideOpenWest, Inc. (NYSE:WOW), United Community Financial Corp (NASDAQ:UCFC), and Quotient Limited (NASDAQ:QTNT). This group of stocks’ market values resemble FLXN’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| MYRG | 14 | 24018 | 3 |
| WOW | 13 | 19948 | 5 |
| UCFC | 11 | 38619 | 2 |
| QTNT | 20 | 229868 | 0 |
| Average | 14.5 | 78113 | 2.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 14.5 hedge funds with bullish positions and the average amount invested in these stocks was $78 million. That figure was $138 million in FLXN’s case. Quotient Limited (NASDAQ:QTNT) is the most popular stock in this table. On the other hand United Community Financial Corp (NASDAQ:UCFC) is the least popular one with only 11 bullish hedge fund positions. Flexion Therapeutics Inc (NASDAQ:FLXN) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Hedge funds were also right about betting on FLXN as the stock returned 29.3% during the fourth quarter (through the end of November) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.
