Hedge Funds Are Buying Stratasys, Ltd. (SSYS)

Hedge fund managers like David Einhorn, Dan Loeb, or Carl Icahn became billionaires through reaping large profits for their investors, which is why piggybacking their stock picks may provide us with significant returns as well. Many hedge funds, like Paul Singer’s Elliott Management, are pretty secretive, but we can still get some insights by analyzing their quarterly 13F filings. One of the most fertile grounds for large abnormal returns is hedge funds’ most popular small-cap picks, which are not so widely followed and often trade at a discount to their intrinsic value. In this article we will check out hedge fund activity in another small-cap stock: Stratasys, Ltd. (NASDAQ:SSYS).

Stratasys, Ltd. (NASDAQ:SSYS) was in 18 hedge funds’ portfolios at the end of the third quarter of 2016. SSYS investors should be aware of an increase in hedge fund sentiment lately. There were 12 hedge funds in our database with SSYS holdings 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 Cempra Inc (NASDAQ:CEMP), Adams Diversified Equity Fund Inc (NYSE:ADX), and Headwaters Inc (NYSE:HW) to gather more data points.

At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.

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Hedge fund activity in Stratasys, Ltd. (NASDAQ:SSYS)

At Q3’s end, a total of 18 of the hedge funds tracked by Insider Monkey were bullish on this stock, up by 50% from the second quarter of 2016. The graph below displays the number of hedge funds with bullish position in SSYS over the last 5 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Of the funds tracked by Insider Monkey, Ken Fisher’s Fisher Asset Management has the number one position in Stratasys, Ltd. (NASDAQ:SSYS), worth close to $77 million. On Fisher Asset Management’s heels is Renaissance Technologies, one of the largest hedge funds in the world, holding a $19.5 million position. Remaining professional money managers that are bullish encompass Philippe Laffont’s Coatue Management, Mario Gabelli’s GAMCO Investors and Matthew A. Weatherbie’s Weatherbie Capital. 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.

As one would reasonably expect, key hedge funds have been driving this bullishness. Coatue Management initiated the largest position in Stratasys, Ltd. (NASDAQ:SSYS). Coatue Management had $18.4 million invested in the company at the end of the quarter. Peter Muller’s PDT Partners also initiated a $3.7 million position during the quarter. The following funds were also among the new SSYS investors: Ken Griffin’s Citadel Investment Group, D. E. Shaw’s D E Shaw, and Glenn Russell Dubin’s Highbridge Capital Management.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Stratasys, Ltd. (NASDAQ:SSYS) but similarly valued. We will take a look at Cempra Inc (NASDAQ:CEMP), Adams Diversified Equity Fund Inc (NYSE:ADX), Headwaters Inc (NYSE:HW), and e.l.f. Beauty Inc (NYSE:ELF). This group of stocks’ market caps match SSYS’s market cap.

As you can see these stocks had an average of 17 hedge funds with bullish positions and the average amount invested in these stocks was $80 million. That figure was $144 million in SSYS’s case. e.l.f. Beauty Inc (NYSE:ELF) is the most popular stock in this table. On the other hand Adams Diversified Equity Fund Inc (NYSE:ADX) is the least popular one with only 4 bullish hedge fund positions. Stratasys, Ltd. (NASDAQ:SSYS) 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 ELF might be a better candidate to consider taking a long position in.

Disclosure: None