Hedge Funds Have Never Been This Bullish On InflaRx N.V. (IFRX)

Reymerlyn Martin

Sat, Jun 29, 2019, 9:31 PM

Does InflaRx N.V. (NASDAQ:IFRX) represent a good buying opportunity at the moment? Let’s quickly check the hedge fund interest towards the company. Hedge fund firms constantly search out bright intellectuals and highly-experienced employees and throw away millions of dollars on satellite photos and other research activities, so it is no wonder why they tend to generate millions in profits each year. It is also true that some hedge fund players fail inconceivably on some occasions, but net net their stock picks have been generating superior risk-adjusted returns on average over the years.

InflaRx N.V. (NASDAQ:IFRX) was in 15 hedge funds' portfolios at the end of March. IFRX shareholders have witnessed an increase in hedge fund interest recently. There were 13 hedge funds in our database with IFRX holdings at the end of the previous quarter. Our calculations also showed that IFRX isn't among the 30 most popular stocks among hedge funds.

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 market by 40 percentage points since May 2014 through May 30, 2019 (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.

We're going to take a gander at the key hedge fund action surrounding InflaRx N.V. (NASDAQ:IFRX).

What have hedge funds been doing with InflaRx N.V. (NASDAQ:IFRX)?

At Q1's end, a total of 15 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 15% from the fourth quarter of 2018. Below, you can check out the change in hedge fund sentiment towards IFRX over the last 15 quarters. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, RA Capital Management was the largest shareholder of InflaRx N.V. (NASDAQ:IFRX), with a stake worth $106.2 million reported as of the end of March. Trailing RA Capital Management was Cormorant Asset Management, which amassed a stake valued at $97.9 million. Adage Capital Management, Redmile Group, and Rock Springs Capital Management were also very fond of the stock, giving the stock large weights in their portfolios.

Consequently, key money managers have been driving this bullishness. Kingdon Capital, managed by Mark Kingdon, created the largest position in InflaRx N.V. (NASDAQ:IFRX). Kingdon Capital had $6.6 million invested in the company at the end of the quarter. Jim Simons's Renaissance Technologies also made a $2.2 million investment in the stock during the quarter. The only other fund with a new position in the stock is Michael Platt and William Reeves's BlueCrest Capital Mgmt..

Let's now review hedge fund activity in other stocks - not necessarily in the same industry as InflaRx N.V. (NASDAQ:IFRX) but similarly valued. We will take a look at Third Point Reinsurance Ltd (NYSE:TPRE), FB Financial Corporation (NYSE:FBK), Kadant Inc. (NYSE:KAI), and GoPro Inc (NASDAQ:GPRO). All of these stocks' market caps are similar to IFRX's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position TPRE,19,76399,1 FBK,5,100875,-3 KAI,17,93212,0 GPRO,23,183454,10 Average,16,113485,2 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 16 hedge funds with bullish positions and the average amount invested in these stocks was $113 million. That figure was $411 million in IFRX's case. GoPro Inc (NASDAQ:GPRO) is the most popular stock in this table. On the other hand FB Financial Corporation (NYSE:FBK) is the least popular one with only 5 bullish hedge fund positions. InflaRx N.V. (NASDAQ:IFRX) 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 20 most popular stocks among hedge funds returned 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. Unfortunately IFRX wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); IFRX investors were disappointed as the stock returned -91.2% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 13 of these stocks already outperformed the market so far in Q2.

Disclosure: None. This article was originally published at Insider Monkey.

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