Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track more than 700 prominent money managers and analyze their quarterly 13F filings. The stocks that are heavily bought by hedge funds historically outperformed the market, though there is no shortage of high profile gigantic failures like hedge funds’ recent losses in Valeant. Let’s take a closer look at what the funds we track think about EnteroMedics Inc (NASDAQ:ETRM) in this article.
EnteroMedics Inc investors should be aware of a decrease in support from the world’s most elite money managers of late. ETRM was in 5 hedge funds’ portfolios at the end of September. There were 6 hedge funds in our database with ETRM positions at the end of the previous quarter. At the end of this article we will also compare ETRM to other stocks including Biodel Inc (NASDAQ:BIOD), Rubicon Technology, Inc. (NASDAQ:RBCN), and Echelon Corporation (NASDAQ:ELON) to get a better sense of its popularity.
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Keeping this in mind, we’re going to take a gander at the recent action encompassing EnteroMedics Inc (NASDAQ:ETRM).
Hedge fund activity in EnteroMedics Inc (NASDAQ:ETRM)
At the end of the third quarter, a total of 5 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -17% from the second quarter. With hedgies’ positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were boosting their stakes considerably (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, Sabby Capital, managed by Hal Mintz, holds the most valuable position in EnteroMedics Inc (NASDAQ:ETRM). Sabby Capital has a $0.5 million position in the stock, comprising less than 0.1% of its 13F portfolio. Sitting at the No. 2 spot is DAFNA Capital Management, led by Nathan Fischel, holding a $0.1 million position; 0.1% of its 13F portfolio is allocated to the company. Remaining members of the smart money with similar optimism consist of Thomas Bailard’s Bailard Inc, Israel Englander’s Millennium Management and Jacob Gottlieb’s Visium Asset Management.
Because EnteroMedics Inc (NASDAQ:ETRM) has faced bearish sentiment from the aggregate hedge fund industry, it’s safe to say that there lies a certain “tier” of funds that decided to sell off their entire stakes by the end of the third quarter. Intriguingly, Stuart Weisbrod’s Iguana Healthcare Management said goodbye to the largest investment of the “upper crust” of funds followed by Insider Monkey, valued at about $0.7 million in stock, and Ken Griffin’s Citadel Investment Group was right behind this move, as the fund dumped its position too. These transactions are important to note, as total hedge fund interest was cut by 1 funds by the end of the third quarter.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as EnteroMedics Inc (NASDAQ:ETRM) but similarly valued. We will take a look at Biodel Inc (NASDAQ:BIOD), Rubicon Technology, Inc. (NASDAQ:RBCN), Echelon Corporation (NASDAQ:ELON), and Acura Pharmaceuticals, Inc. (NASDAQ:ACUR). All of these stocks’ market caps match ETRM’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| BIOD | 8 | 6239 | -1 |
| RBCN | 5 | 8457 | -2 |
| ELON | 4 | 3549 | -1 |
| ACUR | 4 | 4373 | 3 |
As you can see these stocks had an average of 5.25 hedge funds with bullish positions and the average amount invested in these stocks was $6 million. That figure was $1 million in ETRM’s case. Biodel Inc (NASDAQ:BIOD) is the most popular stock in this table. On the other hand Echelon Corporation (NASDAQ:ELON) is the least popular one with only 4 bullish hedge fund positions. EnteroMedics Inc (NASDAQ:ETRM) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard BIOD might be a better candidate to consider a long position.
