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 (Recession is Imminent: We Need A Travel Ban NOW). 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 Neptune Wellness Solutions Inc. (NASDAQ:NEPT).
Neptune Wellness Solutions Inc. (NASDAQ:NEPT) has seen a decrease in hedge fund sentiment of late. Our calculations also showed that NEPT 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 87% since March 2017 and outperformed the S&P 500 ETFs by more than 51 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.
Wall Street Bull
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out stocks recommended/scorned by legendary Bill Miller. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let’s take a glance at the recent hedge fund action encompassing Neptune Wellness Solutions Inc. (NASDAQ:NEPT).
Hedge fund activity in Neptune Wellness Solutions Inc. (NASDAQ:NEPT)
At Q1’s end, a total of 4 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -20% from the fourth quarter of 2019. On the other hand, there were a total of 8 hedge funds with a bullish position in NEPT a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Of the funds tracked by Insider Monkey, Joseph Edelman’s Perceptive Advisors has the number one position in Neptune Wellness Solutions Inc. (NASDAQ:NEPT), worth close to $15.7 million, comprising 0.4% of its total 13F portfolio. Sitting at the No. 2 spot is Renaissance Technologies, holding a $0.7 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Other members of the smart money that hold long positions consist of Ken Griffin’s Citadel Investment Group, Ken Griffin’s Citadel Investment Group and Israel Englander’s Millennium Management. In terms of the portfolio weights assigned to each position Perceptive Advisors allocated the biggest weight to Neptune Wellness Solutions Inc. (NASDAQ:NEPT), around 0.41% of its 13F portfolio. Renaissance Technologies is also relatively very bullish on the stock, earmarking 0.0007 percent of its 13F equity portfolio to NEPT.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Springbok Capital. One hedge fund selling its entire position doesn’t always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don’t think this is the case in this case because none of the 750+ hedge funds tracked by Insider Monkey identified NEPT as a viable investment and initiated a position in the stock.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Neptune Wellness Solutions Inc. (NASDAQ:NEPT) but similarly valued. These stocks are GP Strategies Corporation (NYSE:GPX), Aptorum Group Limited (NASDAQ:APM), Hawthorn Bancshares, Inc. (NASDAQ:HWBK), and PB Bancorp, Inc. (NASDAQ:PBBI). All of these stocks’ market caps are closest to NEPT’s market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position GPX,12,31266,2 APM,1,121,1 HWBK,1,1630,-1 PBBI,8,15629,-1 Average,5.5,12162,0.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 5.5 hedge funds with bullish positions and the average amount invested in these stocks was $12 million. That figure was $17 million in NEPT’s case. GP Strategies Corporation (NYSE:GPX) is the most popular stock in this table. On the other hand Aptorum Group Limited (NASDAQ:APM) is the least popular one with only 1 bullish hedge fund positions. Neptune Wellness Solutions Inc. (NASDAQ:NEPT) is not the least popular stock in this group but hedge fund interest is still below average. 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 8.3% in 2020 through the end of May and still beat the market by 13.2 percentage points. A small number of hedge funds were also right about betting on NEPT as the stock returned 154.7% during the second quarter and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.