Amid an overall bull market, many stocks that smart money investors were collectively bullish on surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Our research shows that most of the stocks that smart money likes historically generate strong risk-adjusted returns. That’s why we weren’t surprised when hedge funds’ top 20 large-cap stock picks generated a return of 37.6% in 2019 (through the end of November) and outperformed the broader market benchmark by 9.9 percentage points. This is why following the smart money sentiment is a useful tool at identifying the next stock to invest in.
Is iMedia Brands, Inc. (NASDAQ:IMBI) the right investment to pursue these days? The best stock pickers are taking an optimistic view. The number of bullish hedge fund bets rose by 1 lately. Our calculations also showed that IMBI isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). IMBI was in 4 hedge funds’ portfolios at the end of September. There were 3 hedge funds in our database with IMBI positions at the end of the previous quarter.
Video: Click the image to 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 Russell 2000 ETFs by 40 percentage points since May 2014 (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.
Ken Griffin of Citadel Investment Group
We leave no stone unturned when looking for the next great investment idea. For example, Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius’ weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock already gained 20 percent. With all of this in mind we’re going to take a look at the key hedge fund action regarding iMedia Brands, Inc. (NASDAQ:IMBI).
Hedge fund activity in iMedia Brands, Inc. (NASDAQ:IMBI)
At Q3’s end, a total of 4 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 33% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards IMBI over the last 17 quarters. With the smart money’s capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were increasing their holdings substantially (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, Jim Simons’s Renaissance Technologies has the largest position in iMedia Brands, Inc. (NASDAQ:IMBI), worth close to $1.2 million, comprising less than 0.1%% of its total 13F portfolio. Sitting at the No. 2 spot is Frederick DiSanto of Ancora Advisors, with a $0.7 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. In terms of the portfolio weights assigned to each position Cruiser Capital Advisors allocated the biggest weight to iMedia Brands, Inc. (NASDAQ:IMBI), around 0.3% of its 13F portfolio. Ancora Advisors is also relatively very bullish on the stock, setting aside 0.03 percent of its 13F equity portfolio to IMBI.
As aggregate interest increased, key hedge funds have jumped into iMedia Brands, Inc. (NASDAQ:IMBI) headfirst. Citadel Investment Group, managed by Ken Griffin, created the biggest position in iMedia Brands. Citadel Investment Group had $0.1 million invested in the company at the end of the quarter.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as iMedia Brands, Inc. (NASDAQ:IMBI) but similarly valued. We will take a look at Riot Blockchain, Inc (NASDAQ:RIOT), Deswell Industries, Inc. (NASDAQ:DSWL), Outlook Therapeutics, Inc. (NASDAQ:OTLK), and Helius Medical Technologies, Inc. (NASDAQ:HSDT). All of these stocks’ market caps are similar to IMBI’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| RIOT | 1 | 117 | 0 |
| DSWL | 2 | 108 | 1 |
| OTLK | 3 | 133 | 0 |
| HSDT | 4 | 503 | 0 |
| Average | 2.5 | 215 | 0.25 |
View the table here if you experience formatting issues.
As you can see these stocks had an average of 2.5 hedge funds with bullish positions and the average amount invested in these stocks was $0 million. That figure was $2 million in IMBI’s case. Helius Medical Technologies, Inc. (NASDAQ:HSDT) is the most popular stock in this table. On the other hand Riot Blockchain, Inc (NASDAQ:RIOT) is the least popular one with only 1 bullish hedge fund position. iMedia Brands, Inc. (NASDAQ:IMBI) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but 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 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately, IMBI wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on IMBI were disappointed as the stock returned -7.1% during the fourth quarter (through the end of November) 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 many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.