Hedge Funds Are Dumping Stratasys, Ltd. (SSYS)

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. Insider Monkey finished processing 821 13F filings submitted by hedge funds and prominent investors. These filings show these funds’ portfolio positions as of March 31st, 2020. What do these smart investors think about Stratasys, Ltd. (NASDAQ:SSYS)?

Is Stratasys, Ltd. (NASDAQ:SSYS) a buy, sell, or hold? The best stock pickers are getting less optimistic. The number of long hedge fund bets went down by 4 in recent months. Our calculations also showed that SSYS 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.

So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 more than 58 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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.

Philippe Laffont of Coatue Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, blockchain technology’s influence will go beyond online payments. So, we are checking out this futurist’s moonshot opportunities in tech stocks. We interview hedge fund managers and ask them about their best ideas. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Now we’re going to review the recent hedge fund action regarding Stratasys, Ltd. (NASDAQ:SSYS).

What have hedge funds been doing with Stratasys, Ltd. (NASDAQ:SSYS)?

Heading into the second quarter of 2020, a total of 14 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -22% from the previous quarter. The graph below displays the number of hedge funds with bullish position in SSYS over the last 18 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.

More specifically, Fisher Asset Management was the largest shareholder of Stratasys, Ltd. (NASDAQ:SSYS), with a stake worth $35.6 million reported as of the end of September. Trailing Fisher Asset Management was GAMCO Investors, which amassed a stake valued at $8.3 million. Coatue Management, Polar Capital, and Two Sigma Advisors were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Quantinno Capital allocated the biggest weight to Stratasys, Ltd. (NASDAQ:SSYS), around 0.41% of its 13F portfolio. PDT Partners is also relatively very bullish on the stock, dishing out 0.12 percent of its 13F equity portfolio to SSYS.

Judging by the fact that Stratasys, Ltd. (NASDAQ:SSYS) has experienced bearish sentiment from the smart money, it’s safe to say that there was a specific group of hedge funds that slashed their full holdings last quarter. It’s worth mentioning that Renaissance Technologies dumped the largest position of the “upper crust” of funds monitored by Insider Monkey, comprising about $8 million in stock, and Richard SchimeláandáLawrence Sapanski’s Cinctive Capital Management was right behind this move, as the fund sold off about $3.6 million worth. These transactions are important to note, as aggregate hedge fund interest fell by 4 funds last quarter.

Let’s check out hedge fund activity in other stocks similar to Stratasys, Ltd. (NASDAQ:SSYS). We will take a look at Schweitzer-Mauduit International, Inc. (NYSE:SWM), SeaWorld Entertainment Inc (NYSE:SEAS), Encore Wire Corporation (NASDAQ:WIRE), and Esperion Therapeutics, Inc. (NASDAQ:ESPR). This group of stocks’ market caps match SSYS’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 17.25 hedge funds with bullish positions and the average amount invested in these stocks was $176 million. That figure was $61 million in SSYS’s case. SeaWorld Entertainment Inc (NYSE:SEAS) is the most popular stock in this table. On the other hand Schweitzer-Mauduit International, Inc. (NYSE:SWM) is the least popular one with only 10 bullish hedge fund positions. Stratasys, Ltd. (NASDAQ:SSYS) 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 13.3% in 2020 through June 25th and surpassed the market by 16.8 percentage points. Unfortunately SSYS wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); SSYS investors were disappointed as the stock returned -1.1% 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.