Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds' and successful investors' positions as of the end of the first quarter. You can find articles about an individual hedge fund's trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 4.5 years and analyze what the smart money thinks of ANI Pharmaceuticals Inc (NASDAQ:ANIP) based on that data and determine whether they were really smart about the stock.
Is ANI Pharmaceuticals Inc (NASDAQ:ANIP) a bargain? Investors who are in the know were becoming less confident. The number of bullish hedge fund bets dropped by 1 recently. Our calculations also showed that ANIP 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.
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 58 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.
[caption id="attachment_671014" align="aligncenter" width="396"] David Brown of Hawk Ridge Management[/caption]
At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a "weekend trading strategy", so we look into his strategy's picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller's investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we're going to go over the recent hedge fund action surrounding ANI Pharmaceuticals Inc (NASDAQ:ANIP).
What have hedge funds been doing with ANI Pharmaceuticals Inc (NASDAQ:ANIP)?
At the end of the first quarter, a total of 12 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -8% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in ANIP over the last 18 quarters. With hedge funds' positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were increasing their holdings substantially (or already accumulated large positions).
Among these funds, Mangrove Partners held the most valuable stake in ANI Pharmaceuticals Inc (NASDAQ:ANIP), which was worth $17.4 million at the end of the third quarter. On the second spot was Renaissance Technologies which amassed $10.7 million worth of shares. Hawk Ridge Management, Arrowstreet Capital, and GLG Partners 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 Mangrove Partners allocated the biggest weight to ANI Pharmaceuticals Inc (NASDAQ:ANIP), around 2.39% of its 13F portfolio. Hawk Ridge Management is also relatively very bullish on the stock, earmarking 1.35 percent of its 13F equity portfolio to ANIP.
Seeing as ANI Pharmaceuticals Inc (NASDAQ:ANIP) has witnessed declining sentiment from hedge fund managers, it's easy to see that there was a specific group of money managers who sold off their entire stakes last quarter. At the top of the heap, James Dondero's Highland Capital Management said goodbye to the biggest investment of all the hedgies watched by Insider Monkey, valued at about $0.4 million in stock. Donald Sussman's fund, Paloma Partners, also dropped its stock, about $0.3 million worth. These moves are important to note, as total hedge fund interest fell by 1 funds last quarter.
Let's go over hedge fund activity in other stocks similar to ANI Pharmaceuticals Inc (NASDAQ:ANIP). We will take a look at FutureFuel Corp. (NYSE:FF), Trueblue Inc (NYSE:TBI), United Natural Foods, Inc. (NYSE:UNFI), and e.l.f. Beauty, Inc. (NYSE:ELF). All of these stocks' market caps match ANIP's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position FF,11,45441,1 TBI,10,32248,-5 UNFI,18,42616,5 ELF,20,135402,-4 Average,14.75,63927,-0.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 14.75 hedge funds with bullish positions and the average amount invested in these stocks was $64 million. That figure was $48 million in ANIP's case. e.l.f. Beauty, Inc. (NYSE:ELF) is the most popular stock in this table. On the other hand Trueblue Inc (NYSE:TBI) is the least popular one with only 10 bullish hedge fund positions. ANI Pharmaceuticals Inc (NASDAQ:ANIP) 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. 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 12.3% in 2020 through June 30th and surpassed the market by 15.5 percentage points. Unfortunately ANIP wasn't nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); ANIP investors were disappointed as the stock returned -20.6% during the second quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.