Published on 30 Jul 2021 on Insider Monkey via Yahoo Finance
Esperion Therapeutics, Inc. (ESPR): Are Hedge Funds Right About This Stock?
Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that's why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to smartest analysts and expensive data/information sources that individual investors can't match. So should one consider investing in Esperion Therapeutics, Inc. (NASDAQ:ESPR)? The smart money sentiment can provide an answer to this question.
Is Esperion Therapeutics, Inc. (NASDAQ:ESPR) a buy right now? Hedge funds were becoming more confident. The number of long hedge fund bets moved up by 1 lately. Esperion Therapeutics, Inc. (NASDAQ:ESPR) was in 17 hedge funds' portfolios at the end of March. The all time high for this statistic is 22. Our calculations also showed that ESPR isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings). There were 16 hedge funds in our database with ESPR holdings at the end of December.
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 115 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.