These Stocks Are Surging but See Which Ones Hedge Funds Think are Worth Investing In

The markets have been advancing on Friday after an encouraging speech from the Fed’s Janet Yellen, who said that there is a high probability that the interest rates will be increased this year, which ensured the investors about the Fed’s confidence in the economy. However, among the overall uptrend, several companies managed to stand above the crowd, registering gains that go as much as over 80% boost of the Bellerophon Therapeutics Inc (NASDAQ:BLPH)‘s stock. In this article, we will take a closer look at some of the top gainers on Friday and will see whether the smart money have been as bullish on them as the overall market today.

The smart money sentiment is a metric that is often overlooked, but our research has shown that hedge funds are actually the perfect investors to emulate due to their extensive analysis and great skills in picking stocks. However, hedge funds on average have been lagging the market lately due to their large sizes, which forces them to trade returns for less risk, but they still generate solid returns on the long side of their portfolios. Through extensive backtests that span through the period between 1999 and 2012, we determined that hedge funds’ top small-cap ideas can outperform the market over the long term. Based on these results, we launched our small-cap strategy that involves imitating top 15 small-cap stocks among over 700 hedge funds in August 2012 and it has returned over 118% since then, beating the market by over 60 percentage points (read more details here).

In this way, let’s take a closer look at the Friday intraday gainers, starting with Bellerophon Therapeutics Inc (NASDAQ:BLPH), which surged the most today, although despite the 80% boost, it is still down by 24% year-to-date. Nevertheless, the news that sparked the gain signal also a potential for the long-term as it involved the announcement of positive data from the company’s Phase 2 study of INOpulse for the treatment of Pulmonary Arterial Hypertension. Bellerophon, a developer of bio-therapeutic drugs, has also received a Special Protocol Assessment for its Phase 3 program from the US Food and Drug Administration.

Even though Bellerophon Therapeutics Inc (NASDAQ:BLPH) is not very popular among the funds we track, the six funds that disclosed stakes as of the end of June amassed nearly 45% of the company. Moreover, as the number of funds with long positions in the company declined by one between April and June, the aggregate value of their holdings fell to $45.99 million from $54.72 million. Nevertheless, the largest position among these investors is held by Steven B. Klinsky‘s New Mountain Capital, which disclosed ownership of 4.86 million shares worth $38.53 million, representing the last of the fund’s three holdings. Baker Bros. Advisors is also bullish on the company, owning 350,000 shares as of the end of the second quarter.

On the second spot is Cirrus Logic, Inc. (NASDAQ:CRUS), which jumped by over 14% today, apparently without any significant news behind the move. Earlier today, Oppenheimer reiterated its ‘Market Perform’ rating on Cirrus Logic’s stock, which overall has a consensus ‘Buy’ rating and a mean price target of over $42 per share. During the second quarter, Cirrus Logic, Inc. (NASDAQ:CRUS) has witnessed an increase in popularity among the hedge funds in our database, with the number of investors going up to 25 from 22, while the total value of holdings jumping to $204.24 million, equal 9.50% of the company, from $151.75 million. More specifically, David E. Shaw’s D.E. Shaw and Clint Carlson’s Carlson Capital ranked as the top two shareholders, holding 1.30 million shares and 858,500 shares, after increases of 24% and 84% respectively. On the following spots are investors with new stakes, namely Joel Greenblatt’s Gotham Asset Management and Jim Simons’ Renaissance Technologies, which own 760,700 shares and 606,900 shares respectively.

Finally, 2U Inc (NASDAQ:TWOU)‘s stock increased more modestly, by around 6%, which expanded the stock’s year-to-date gains to over 87%. Earlier today, the company has announced a public offering of 3.50 million common shares at $34.00 per unit, including 400,000 shares by selling stockholders. However, despite the impressive year-to-date returns, the provider of cloud-based SaaS platform for college and universities, doesn’t have many fans among hedge funds (at least among those from our database). At the end of June, 13 funds held $53.95 million worth of 2U Inc (NASDAQ:TWOU)’s stock, up from $24.45 million a year earlier and while the number of investors remained flat on the quarter, they still amassed around 4.10% of the company’s outstanding stock. Among them, Donald Chiboucis‘s Columbus Circle Investors has been the most bullish on 2U Inc (NASDAQ:TWOU) as it added 465,500 shares, taking it to 494,800 shares during the second quarter.

Disclosure: none