Hedge funds run by legendary names like Nelson Peltz and David Tepper make billions of dollars a year for themselves and their super-rich accredited investors (you’ve got to have a minimum of $1 million liquid to invest in a hedge fund) by spending enormous resources on analyzing and uncovering data about small-cap stocks that the big brokerage houses don’t follow. Small caps are where they can generate significant out-performance. These stocks have been on a tear since the end of June, outperforming large-cap index funds by more than 10 percentage points. That’s why we pay special attention to hedge fund activity in these stocks.
Is Kadmon Holdings LLC (NYSE:KDMN) the right pick for your portfolio? The stock went public at the end of July and by the end of the third quarter, it managed to capture the attention of 11 funds tracked by Insider Monkey. 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 Spartan Motors Inc (NASDAQ:SPAR), Jive Software Inc (NASDAQ:JIVE), and Dorian LPG Ltd (NYSE:LPG) to gather more data points.
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We follow over 700 hedge funds and other institutional investors and by analyzing their quarterly 13F filings, we identify stocks that they are collectively bullish on and develop investment strategies based on this data. One strategy that outperformed the market over the last year involves selecting the 100 best-performing funds and identifying the 30 mid-cap stocks that they are collectively most bullish on. Over the past year, this strategy generated returns of 18%, topping the 8% gain registered by S&P 500 ETFs. We launched this strategy 2.5 years ago and it returned more than 39% since then, vs. 22% gain registered by the S&P 500 ETFs.
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What have hedge funds been doing with Kadmon Holdings LLC (NYSE:KDMN)?
As stated earlier, heading into the fourth quarter of 2016, a total of 11 of the hedge funds tracked by Insider Monkey were bullish on this stock. So, let’s check out which hedge funds were among the top holders of the stock at the end of September.
When looking at the institutional investors followed by Insider Monkey, Dan Loeb’s Third Point has the largest position in Kadmon Holdings LLC (NYSE:KDMN), worth close to $56.7 million. On Third Point’s heels is Joseph Edelman of Perceptive Advisors, with a $16.2 million position; 1% of its 13F portfolio is allocated to the stock. Some other peers that hold long positions consist of Steve Cohen’s Point72 Asset Management, Edward A. Mule’s Silver Point Capital and Millennium Management, one of the 10 largest hedge funds in the world. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.
On the next page, we’ll compare the sentiment surrounding Kadmon Holdings LLC with the same metric registered by other stocks with similar market values.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Kadmon Holdings LLC (NYSE:KDMN) but similarly valued. We will take a look at Spartan Motors Inc (NASDAQ:SPAR), Jive Software Inc (NASDAQ:JIVE), Dorian LPG Ltd (NYSE:LPG), and UMH Properties, Inc (NYSE:UMH). All of these stocks’ market caps are closest to KDMN’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SPAR | 14 | 49536 | 1 |
| JIVE | 13 | 48850 | -2 |
| LPG | 8 | 56727 | -2 |
| UMH | 5 | 28818 | 1 |
As you can see these stocks had an average of 10 hedge funds with bullish positions and the average amount invested in these stocks was $46 million. That figure was $97 million in KDMN’s case. Spartan Motors Inc (NASDAQ:SPAR) is the most popular stock in this table. On the other hand UMH Properties, Inc (NYSE:UMH) is the least popular one with only 5 bullish hedge fund positions. Kadmon Holdings LLC (NYSE:KDMN) 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. In this regard SPAR might be a better candidate to consider taking a long position in.
Disclosure: None
