At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards EDAP TMS S.A. (NASDAQ:EDAP).
EDAP TMS S.A. (NASDAQ:EDAP) was in 3 hedge funds’ portfolios at the end of the first quarter of 2020. EDAP shareholders have witnessed a decrease in hedge fund interest recently. There were 5 hedge funds in our database with EDAP holdings at the end of the previous quarter. Our calculations also showed that EDAP isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).
Video: 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 S&P 500 ETFs by 44 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.
Wall Street Bull
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, legendary investor Bill Miller told investors to sell 7 extremely popular recession stocks last month. So, we went through his list and recommended another stock with 100% upside potential instead. We interview hedge fund managers and ask them about their best ideas. You can watch our latest hedge fund manager interview here and find out the name of the large-cap healthcare stock that Sio Capital’s Michael Castor expects to double. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we’re going to take a gander at the fresh hedge fund action surrounding EDAP TMS S.A. (NASDAQ:EDAP).
Hedge fund activity in EDAP TMS S.A. (NASDAQ:EDAP)
At the end of the first quarter, a total of 3 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -40% from one quarter earlier. On the other hand, there were a total of 3 hedge funds with a bullish position in EDAP a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in EDAP TMS S.A. (NASDAQ:EDAP) was held by Opaleye Management, which reported holding $5 million worth of stock at the end of September. It was followed by Archon Capital Management with a $0.8 million position. The only other hedge fund that is bullish on the company was Manatuck Hill Partners.
Since EDAP TMS S.A. (NASDAQ:EDAP) has witnessed a decline in interest from hedge fund managers, logic holds that there lies a certain “tier” of hedge funds that elected to cut their entire stakes in the third quarter. Intriguingly, Nick Thakore’s Diametric Capital sold off the biggest stake of all the hedgies watched by Insider Monkey, totaling an estimated $0.4 million in stock. Gavin Saitowitz and Cisco J. del Valle’s fund, Springbok Capital, also cut its stock, about $0.3 million worth. These bearish behaviors are interesting, as total hedge fund interest dropped by 2 funds in the third quarter.
Let’s go over hedge fund activity in other stocks similar to EDAP TMS S.A. (NASDAQ:EDAP). These stocks are Immunic, Inc. (NASDAQ:IMUX), Global Ship Lease, Inc. (NYSE:GSL), Noble Corporation plc (NYSE:NE), and EMCORE Corporation (NASDAQ:EMKR). All of these stocks’ market caps resemble EDAP’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| IMUX | 2 | 472 | 0 |
| GSL | 6 | 8263 | -2 |
| NE | 14 | 17161 | -4 |
| EMKR | 12 | 26002 | 0 |
| Average | 8.5 | 12975 | -1.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 8.5 hedge funds with bullish positions and the average amount invested in these stocks was $13 million. That figure was $6 million in EDAP’s case. Noble Corporation plc (NYSE:NE) is the most popular stock in this table. On the other hand Immunic, Inc. (NASDAQ:IMUX) is the least popular one with only 2 bullish hedge fund positions. EDAP TMS S.A. (NASDAQ:EDAP) 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 7.9% in 2020 through May 22nd and surpassed the market by 15.6 percentage points. Unfortunately EDAP wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); EDAP investors were disappointed as the stock returned 7.9% during the second quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
Disclosure: None. This article was originally published at Insider Monkey.
