The elite funds run by legendary investors such as Dan Loeb and David Tepper make hundreds of millions of dollars for themselves and their investors by spending enormous resources doing research on small cap stocks that big investment banks don’t follow. Because of their pay structures, they have strong incentive to do the research necessary to beat the market. That’s why we pay close attention to what they think in small cap stocks. In this article, we take a closer look at NeoGenomics, Inc. (NASDAQ:NEO) from the perspective of those elite funds.
Hedge fund interest in NeoGenomics, Inc. (NASDAQ:NEO) shares was flat at the end of last quarter. This is usually a negative indicator. It might come with a little bit of a surprise, as the shares of NeoGenomics, Inc. (NASDAQ:NEO) gained 5.91% value during the third quarter. We will find out more about the hedgies that held stake in NeoGenomics, Inc. (NASDAQ:NEO), at the end of the last quarter.
At the end of this article, we will also compare NeoGenomics, Inc. (NASDAQ:NEO) to other stocks, including Perry Ellis International, Inc. (NASDAQ:PERY), and Addus Homecare Corporation (NASDAQ:ADUS) to get a better sense of its popularity.
Today, there are a lot of formulas stock traders have at their disposal to grade their holdings. A pair of the most underrated formulas are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the elite hedge fund managers can outclass the S&P 500 by a healthy margin (see the details here).
Keeping this in mind, let’s check out the new action regarding NeoGenomics, Inc. (NASDAQ:NEO).
How are hedge funds trading NeoGenomics, Inc. (NASDAQ:NEO)?
Heading into Q4, a total of 9 of the hedge funds tracked by Insider Monkey were long this stock, unchanged from one quarter earlier. With hedge funds’ sentiment swirling, there exists a select group of noteworthy hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Driehaus Capital, managed by Richard Driehaus, holds the largest position in NeoGenomics, Inc. (NASDAQ:NEO). Driehaus Capital has a $10 million position in the stock, comprising 0.4% of its 13F portfolio. The second most bullish fund manager is Renaissance Technologies, which holds a $1.8 million position; the fund has less than 0.1% of its 13F portfolio invested in the stock. Some other professional money managers that are bullish contain D E Shaw, Mario Gabelli’s GAMCO Investors, and Mark Coe’s Coe Capital Management.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Balyasny Asset Management. 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 here because only one of the 700+ hedge funds tracked by Insider Monkey identified as a viable investment and initiated a position in the stock (that fund was Ellington).
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as NeoGenomics, Inc. (NASDAQ:NEO) but similarly valued. We will take a look at Perry Ellis International, Inc. (NASDAQ:PERY), Addus Homecare Corporation (NASDAQ:ADUS), and Campus Crest Communities Inc (NYSE:CCG). This group of stocks’ market valuations are closest to NeoGenomics, Inc. (NASDAQ:NEO)’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| PERY | 17 | 31983 | 1 |
| ADUS | 10 | 18636 | 3 |
| CCG | 11 | 93663 | 1 |
As you can see these stocks had an average of 13 hedge funds with bullish positions and the average amount invested in these stocks was $47 million. That figure was $15 million in NeoGenomics, Inc. (NASDAQ:NEO)’s case. Perry Ellis International, Inc. (NASDAQ:PERY) is the most popular stock in this table. On the other hand, Addus Homecare Corporation (NASDAQ:ADUS) is the least popular one with only 10 bullish hedge fund positions. Compared to these stocks NeoGenomics, Inc. (NASDAQ:NEO) is even less popular than Addus Homecare Corporation (NASDAQ:ADUS). Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case, more research is warranted.
