Were Hedge Funds Right About Eagle Pharmaceuticals Inc (EGRX)?

Hedge Funds and other institutional investors have just completed filing their 13Fs with the Securities and Exchange Commission, revealing their equity portfolios as of the end of September. At Insider Monkey, we follow nearly 900 active hedge funds and notable investors and by analyzing their 13F filings, we can determine the stocks that they are collectively bullish on. One of their picks is Eagle Pharmaceuticals Inc (NASDAQ:EGRX), so let’s take a closer look at the sentiment that surrounds it in the current quarter.

Eagle Pharmaceuticals Inc (NASDAQ:EGRX) shareholders have witnessed a decrease in hedge fund sentiment lately. Eagle Pharmaceuticals Inc (NASDAQ:EGRX) was in 17 hedge funds’ portfolios at the end of the first quarter of 2021. The all time high for this statistic is 23. There were 18 hedge funds in our database with EGRX holdings at the end of December. Our calculations also showed that EGRX isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).

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 S&P 500 ETFs by 115 percentage points since March 2017 (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.

Lee Ainslie of Maverick Capital

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, pet market is growing at a 7% annual rate and is expected to reach $110 billion in 2021. So, we are checking out the 5 best stocks for animal lovers. We go through lists like the 15 best Jim Cramer stocks to identify the next Tesla that will deliver outsized returns. 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. You can subscribe to our free daily newsletter on our homepage. With all of this in mind we’re going to take a gander at the latest hedge fund action regarding Eagle Pharmaceuticals Inc (NASDAQ:EGRX).

Do Hedge Funds Think EGRX Is A Good Stock To Buy Now?

At Q1’s end, a total of 17 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -6% from the previous quarter. The graph below displays the number of hedge funds with bullish position in EGRX over the last 23 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were increasing their holdings significantly (or already accumulated large positions).

The largest stake in Eagle Pharmaceuticals Inc (NASDAQ:EGRX) was held by Park West Asset Management, which reported holding $18.8 million worth of stock at the end of December. It was followed by Renaissance Technologies with a $8.5 million position. Other investors bullish on the company included Armistice Capital, GLG Partners, and Two Sigma Advisors. In terms of the portfolio weights assigned to each position Park West Asset Management allocated the biggest weight to Eagle Pharmaceuticals Inc (NASDAQ:EGRX), around 0.57% of its 13F portfolio. Zebra Capital Management is also relatively very bullish on the stock, dishing out 0.33 percent of its 13F equity portfolio to EGRX.

Since Eagle Pharmaceuticals Inc (NASDAQ:EGRX) has faced bearish sentiment from the smart money, logic holds that there exists a select few hedge funds who were dropping their full holdings by the end of the first quarter. At the top of the heap, David Harding’s Winton Capital Management said goodbye to the biggest position of the “upper crust” of funds followed by Insider Monkey, totaling about $0.8 million in stock. Mika Toikka’s fund, AlphaCrest Capital Management, also dropped its stock, about $0.3 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest fell by 1 funds by the end of the first quarter.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Eagle Pharmaceuticals Inc (NASDAQ:EGRX) but similarly valued. These stocks are Urstadt Biddle Properties Inc. (NYSE:UBP), Global Cord Blood Corp (NYSE:CO), ProSight Global, Inc. (NYSE:PROS), GasLog Ltd (NYSE:GLOG), International Seaways, Inc. (NYSE:INSW), Biodesix, Inc. (NASDAQ:BDSX), and Sierra Wireless, Inc. (NASDAQ:SWIR). This group of stocks’ market values resemble EGRX’s market value.

View table here if you experience formatting issues.

As you can see these stocks had an average of 9.6 hedge funds with bullish positions and the average amount invested in these stocks was $60 million. That figure was $64 million in EGRX’s case. GasLog Ltd (NYSE:GLOG) is the most popular stock in this table. On the other hand Urstadt Biddle Properties Inc. (NYSE:UBP) is the least popular one with only 1 bullish hedge fund positions. Eagle Pharmaceuticals Inc (NASDAQ:EGRX) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for EGRX is 76.2. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 28.5% in 2021 through July 23rd and still beat the market by 10.1 percentage points. Hedge funds were also right about betting on EGRX, though not to the same extent, as the stock returned 14.6% since Q1 (through July 23rd) and outperformed the market as well.

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Disclosure: None. This article was originally published at Insider Monkey.