At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (see why hell is coming). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Esperion Therapeutics (NASDAQ:ESPR) at the end of the first quarter and determine whether the smart money was really smart about this stock.
Esperion Therapeutics (NASDAQ:ESPR) investors should be aware of an increase in hedge fund interest recently. Our calculations also showed that ESPR isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
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 101% since March 2017 and outperformed the S&P 500 ETFs by more than 58 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Matthew Hulsizer of PEAK6 Capital
At Insider Monkey we scour multiple sources to uncover the next great investment idea. We go through lists like the 10 most profitable companies in America to pick the best large-cap stocks to buy. 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. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. Keeping this in mind we’re going to analyze the fresh hedge fund action surrounding Esperion Therapeutics (NASDAQ:ESPR).
What does smart money think about Esperion Therapeutics (NASDAQ:ESPR)?
At Q1’s end, a total of 18 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 20% from the fourth quarter of 2019. By comparison, 14 hedge funds held shares or bullish call options in ESPR 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.
Among these funds, Pentwater Capital Management held the most valuable stake in Esperion Therapeutics (NASDAQ:ESPR), which was worth $72.9 million at the end of the third quarter. On the second spot was Marshall Wace LLP which amassed $41.7 million worth of shares. Platinum Asset Management, Rhenman & Partners Asset Management, and Balyasny Asset 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 Rhenman & Partners Asset Management allocated the biggest weight to Esperion Therapeutics (NASDAQ:ESPR), around 2.62% of its 13F portfolio. Pentwater Capital Management is also relatively very bullish on the stock, earmarking 1.2 percent of its 13F equity portfolio to ESPR.
With a general bullishness amongst the heavyweights, some big names were leading the bulls’ herd. Marshall Wace LLP, managed by Paul Marshall and Ian Wace, established the most outsized position in Esperion Therapeutics (NASDAQ:ESPR). Marshall Wace LLP had $41.7 million invested in the company at the end of the quarter. Henrik Rhenman’s Rhenman & Partners Asset Management also initiated a $18.7 million position during the quarter. The other funds with new positions in the stock are Phill Gross and Robert Atchinson’s Adage Capital Management, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, and Richard SchimeláandáLawrence Sapanski’s Cinctive Capital Management.
Let’s now take a look at hedge fund activity in other stocks similar to Esperion Therapeutics (NASDAQ:ESPR). We will take a look at Dillard’s, Inc. (NYSE:DDS), Diversified Healthcare Trust (NASDAQ:DHC), KKR Real Estate Finance Trust Inc. (NYSE:KREF), and SunPower Corporation (NASDAQ:SPWR). All of these stocks’ market caps match ESPR’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| DDS | 13 | 125316 | -7 |
| DHC | 10 | 12170 | 1 |
| KREF | 7 | 27093 | -2 |
| SPWR | 14 | 26020 | -1 |
| Average | 11 | 47650 | -2.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 11 hedge funds with bullish positions and the average amount invested in these stocks was $48 million. That figure was $191 million in ESPR’s case. SunPower Corporation (NASDAQ:SPWR) is the most popular stock in this table. On the other hand KKR Real Estate Finance Trust Inc. (NYSE:KREF) is the least popular one with only 7 bullish hedge fund positions. Compared to these stocks Esperion Therapeutics (NASDAQ:ESPR) is more popular among hedge funds. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 18.6% in 2020 through July 27th but still managed to beat the market by 17.1 percentage points. Hedge funds were also right about betting on ESPR, though not to the same extent, as the stock returned 29.6% since Q1 and outperformed the market as well.
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Disclosure: None. This article was originally published at Insider Monkey.
