Investing in hedge funds can bring large profits, but it’s not for everybody, since hedge funds are available only for high-net-worth individuals. They generate significant returns for investors to justify their large fees and they allocate a lot of time and employ a complex analysis to determine the best stocks to invest in. A particularly interesting group of stocks that hedge funds like is the small-caps. The huge amount of capital does not allow hedge funds to invest a lot in small-caps, but our research showed that their most popular small-cap ideas are less efficiently priced and generate stronger returns than their large- and mega-cap picks and the broader market. That is why we follow the hedge fund activity in the small-cap space.
STAAR Surgical Company (NASDAQ:STAA) has seen a decrease in activity from the world’s largest hedge funds recently. STAA was in 6 hedge funds’ portfolios at the end of the third quarter of 2015. There were 8 hedge funds in our database with STAA positions at the end of the previous quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as KongZhong Corporation(ADR) (NASDAQ:KZ), Era Group Inc (NYSE:ERA), and Adamas Pharmaceuticals Inc (NASDAQ:ADMS) to gather more data points.
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Follow Staar Surgical Co (NASDAQ:STAA)
Today there are several formulas shareholders put to use to grade publicly traded companies. A duo of the less utilized formulas is composed of hedge fund and insider trading activity. Our experts have shown that, historically, those who follow the top picks of the best money managers can outpace the market by a superb margin (see the details here).
With all of this in mind, we’re going to check out the fresh action surrounding STAAR Surgical Company (NASDAQ:STAA).
What does the smart money think about STAAR Surgical Company (NASDAQ:STAA)?
Heading into Q4, a total of 6 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -25% from the second quarter. With the smart money’s sentiment swirling, there exists a few notable hedge fund managers who were upping their holdings significantly (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Broadwood Capital, managed by Neal C. Bradsher, holds the number one position in STAAR Surgical Company (NASDAQ:STAA). Broadwood Capital has a $66.9 million position in the stock, comprising 13.2% of its 13F portfolio. Sitting at the No. 2 spot is Palo Alto Investors, led by William Leland Edwards, holding a $20.5 million position; the fund has 1% of its 13F portfolio invested in the stock. Other peers with similar optimism contain Philip Hempleman’s Ardsley Partners, Paul Orlin and Alex Porter’s Amici Capital and D. E. Shaw’s D E Shaw.
Because STAAR Surgical Company (NASDAQ:STAA) has witnessed bearish sentiment from the entirety of the hedge funds we track, it’s easy to see that there exist a select few money managers that decided to sell off their full holdings last quarter. Intriguingly, Israel Englander’s Millennium Management dropped the largest position of the 700 funds watched by Insider Monkey, valued at close to $0.9 million in stock. Ken Griffin’s fund, Citadel Investment Group, also dumped its stock, about $0.2 million worth. These moves are interesting, as total hedge fund interest fell by 2 funds last quarter.
On the next page, we analyze hedge fund activity of similarly priced stocks to get a better feel on what the elite funds think of STAAR Surgical Company (NASDAQ:STAA).
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as STAAR Surgical Company (NASDAQ:STAA) but similarly valued. These stocks are KongZhong Corporation(ADR) (NASDAQ:KZ), Era Group Inc (NYSE:ERA), Adamas Pharmaceuticals Inc (NASDAQ:ADMS), and C1 Financial Inc (NYSE:BNK). This group of stocks’ market valuations match STAA’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| KZ | 4 | 6337 | -3 |
| ERA | 11 | 61754 | 2 |
| ADMS | 15 | 38468 | 0 |
| BNK | 4 | 18470 | 1 |
As you can see these stocks had an average of 9 hedge funds with bullish positions and the average amount invested in these stocks was $31 million. That figure was $94 million in STAA’s case. Adamas Pharmaceuticals Inc (NASDAQ:ADMS) is the most popular stock in this table. On the other hand KongZhong Corporation(ADR) (NASDAQ:KZ) is the least popular one with only 4 bullish hedge fund positions. STAAR Surgical Company (NASDAQ:STAA) 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 focus on analyzing stocks that hedge funds are collectively the most fond of and, in this case, ADMS may be a better alternative.
