Last year, we predicted the onset of the first US recession since 2009 and we predicted in advance that the market would decline by at least 20% in (Recession is looming: we need a travel ban NOW). In these volatile markets, we take a close look at hedge fund deposits to get a reading of the direction each stock might take. In this article, we’ll take a closer look at hedge fund sentiment towards Diffusion Pharmaceuticals Inc. (NASDAQ: DFFN).
Interest of hedge funds in Diffusion Pharmaceuticals Inc. (NASDAQ: DFFN) shares was stable at the end of the last quarter. This is usually a negative indicator. Our calculations also showed that DFFN is not in the top 30 most popular stocks among hedge funds (click for Q1 rank). At the end of this article, we’ll also be comparing DFFN to other stocks, including Core Molding Technologies, Inc. (NYSE: CMT), Sino-Global Shipping America, Ltd. (NASDAQ: SINO) and Acasti Pharma Inc. (NASDAQ: ACST) to get a better idea of its popularity.
In today’s market, there are many signals that market participants use to value their investments in stocks. Some of the lesser used signals are hedge fund and insider trading signals. Our researchers have shown that, historically, those who follow the best picks of elite fund managers can beat the S&P 500 by a significant amount (see details here). Additionally, our monthly newsletter’s long stock picks portfolio has returned 206.8% since March 2017 (through May 2021) and has beaten the S&P 500 Index by over 115 percentage points. You can download a sample issue of this newsletter from our website.
John Overdeck of Two Sigma Advisors
At Insider Monkey, we scour multiple sources to uncover the next big investing idea. For example, an activist hedge fund wants to buy this biotech share at $ 26 for $ 50. We therefore recommended a long position to our monthly premium newsletter subscribers. We’re going through lists like the top 10 battery stocks to pick the next Tesla that will deliver 10x performance. Even though we only recommend positions in a tiny fraction of the companies we analyze, we check as many stocks as possible. We read letters from hedge fund investors and listen to equity pitches at hedge fund conferences. You can sign up for our free daily newsletter on our homepage. With all of that in mind, let’s take a look at the new hedge fund action encompassing Diffusion Pharmaceuticals Inc. (NASDAQ: DFFN).
Do hedge funds think DFFN is a good stock to buy now?
At the end of the first quarter, a total of 3 of the hedge funds tracked by Insider Monkey were long in this stock, a change of 0% from the previous quarter. On the other hand, there were a total of 4 hedge funds with a bullish position on DFFN a year ago. With the whirlwind of hedge fund sentiment, there is a select group of key hedge fund managers who were significantly increasing their holdings (or already building up large positions).
The largest stake in Diffusion Pharmaceuticals Inc. (NASDAQ: DFFN) was held by Renaissance Technologies, which said it held $ 1.7 million in shares at the end of December. It was followed by Millennium Management with a position of $ 0.3 million. The only other hedge fund that is bullish on the company was Two Sigma Advisors.
We believe that hedge fund activity on the stock is unfavorable, but in this case there was only one hedge fund that sold its entire position: Citadel Investment Group. A hedge fund that sells its entire position does not always imply a bearish intention. Theoretically, a hedge fund can decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we do not believe this to be the case in this case, as only one of the 800+ hedge funds tracked by Insider Monkey identified itself as a viable investment and initiated a position in the stock (this fund was Millennium Management ).
Let’s review hedge fund activity in other stocks similar to Diffusion Pharmaceuticals Inc. (NASDAQ: DFFN). These stocks are Core Molding Technologies, Inc. (NYSE: CMT), Sino-Global Shipping America, Ltd. (NASDAQ: SINO), Acasti Pharma Inc. (NASDAQ: ACST), Document Security Systems, Inc. (NYSE: DSS), SilverBow Resorces, Inc. (NYSE: SBOW), Cortland Bancorp (NASDAQ: CLDB) and NexPoint Real Estate Finance, Inc. (NYSE: NREF). The market value of this group of shares is similar to the market value of DFFN.[table] Ticker, number of HF with positions, total value of HF positions (x1000), change of HF position CMT, 3,17252, -1 SINO, 1,169,1 ACST, 1,31, -3 DSS, 2,294,1 SBOW, 4 , 36762, -2 CLDB, 2.9927.0 NREF, 2.3997, -2 Medium, 2.1.9776, -0.9 [/table]
Check the table here if you have formatting issues.
As you can see, these stocks had an average of 2.1 hedge funds with bullish positions and the average amount invested in these stocks was $ 10 million. That figure was $ 2 million in the case of DFFN. SilverBow Resorces, Inc. (NYSE: SBOW) is the most popular share in this table. On the other hand, Sino-Global Shipping America, Ltd. (NASDAQ: SINO) is the least popular with only 1 bullish hedge fund positions. Diffusion Pharmaceuticals Inc. (NASDAQ: DFFN) isn’t the most popular stock in this group, but hedge fund interest is still above average. Our overall hedge fund sentiment score for DFFN is 60.8. Stocks with a higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. This is a slightly positive signal, but we prefer to spend our time researching the stocks on which hedge funds are accumulating. Our calculations showed that the 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 17.2% in 2021 through June 11 and again beat the market by 3.3 percentage points. Unfortunately, DFFN was not as popular as these 5 stocks and the hedge funds that bet on DFFN were disappointed as the stock has returned -14.1% since the end of March (until 6/11) and has under- performed the market. If you want to invest in large cap stocks with huge upside potential, you should check out the 5 most popular stocks among hedge funds, as many of these stocks have already outperformed the market since 2019.
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Disclosure: none. This article originally appeared on Insider Monkey.