OvaScience Inc (NASDAQ:OVAS)’s shares are off by almost 29% today amid the company pricing a secondary public offering of $7.15 million shares at $7 a share. Underwriters of the offering have the right to buy an additional 1,072,500 shares. The secondary offering should raise $46.8 million, which OVAS plans to use to fund expansion of AUGMENT in Canada and Japan. The company also plans to use the funds for general corporate purposes and working capital. In this way, OvaScience’s stock is down by more than 28% year-to-date and the hedge fund sentiment is weak as we will discuss later in this article.
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To most shareholders, hedge funds are seen as unimportant, outdated investment vehicles of yesteryear. While there are greater than 8000 funds with their doors open at present, We hone in on the elite of this group, around 700 funds. These hedge fund managers shepherd the lion’s share of all hedge funds’ total asset base, and by tracking their inimitable picks, Insider Monkey has unearthed several investment strategies that have historically outrun the S&P 500 index. Insider Monkey’s small-cap hedge fund strategy outperformed the S&P 500 index by 12 percentage points per annum for a decade in their back tests.
With all of this in mind, we’re going to analyze the recent action surrounding OvaScience Inc (NASDAQ:OVAS).
Heading into the second quarter of 2016, a total of 8 of the hedge funds tracked by Insider Monkey were bullish on this stock, down by one from one quarter earlier.
Of the funds tracked by Insider Monkey, William B. Gray’s Orbis Investment Management has the biggest position in OvaScience Inc (NASDAQ:OVAS), worth close to $19.8 million, accounting for 0.1% of its total 13F portfolio. The second most bullish fund manager is Adage Capital Management, managed by Phill Gross and Robert Atchinson, which holds a $17.1 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Remaining hedge funds and institutional investors with similar optimism consist of Thomas E. Claugus’s GMT Capital, George McCabe’s Portolan Capital Management and Bihua Chen’s Cormorant Asset Management.
Seeing as OvaScience Inc (NASDAQ:OVAS) has experienced falling interest from hedge fund managers, we can see that there is a sect of hedge funds who were dropping their entire stakes heading into Q2. On the next page, we are going to present some of the funds that exited the stock. In addition, since the level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives, at the end of this article we will examine companies such as American Software, Inc. (NASDAQ:AMSWA), Syneron Medical Ltd. (NASDAQ:ELOS), and Bazaarvoice Inc (NASDAQ:BV) to gather more data points.
Interestingly, Oleg Nodelman’s EcoR1 Capital dropped the biggest position of the “upper crust” of funds watched by Insider Monkey, valued at close to $4.2 million in stock. Jim Simons’ fund, Renaissance Technologies, also said goodbye to its stock, about $1 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest fell by 1 funds heading into Q2.
Let’s now review hedge fund activity in other stocks similar to OvaScience Inc (NASDAQ:OVAS). These stocks are American Software, Inc. (NASDAQ:AMSWA), Syneron Medical Ltd. (NASDAQ:ELOS), Bazaarvoice Inc (NASDAQ:BV), and AV Homes Inc (NASDAQ:AVHI). All of these stocks’ market caps match OVAS’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| AMSWA | 6 | 18867 | 0 |
| ELOS | 14 | 88615 | 0 |
| BV | 18 | 76850 | -4 |
| AVHI | 5 | 17844 | -4 |
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 $51 million. That figure was $53 million in OVAS’s case. Bazaarvoice Inc (NASDAQ:BV) is the most popular stock in this table. On the other hand, AV Homes Inc (NASDAQ:AVHI) is the least popular one with only 5 bullish hedge fund positions. OvaScience Inc (NASDAQ:OVAS) 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 BV might be a better candidate to consider a long position.
Disclosure: None
