Hedge Funds Are Nibbling On Profound Medical Corp. (PROF)

In this article we will check out the progression of hedge fund sentiment towards Profound Medical Corp. (NASDAQ:PROF) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.

Is Profound Medical Corp. (NASDAQ:PROF) a healthy stock for your portfolio? Money managers are in an optimistic mood. The number of long hedge fund bets increased by 5 recently. Our calculations also showed that PROF 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). PROF was in 8 hedge funds’ portfolios at the end of March. There were 3 hedge funds in our database with PROF positions at the end of the previous quarter.

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 was 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Philip Hempleman of Ardsley Partners

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, We take a look at lists like the 10 most profitable companies in the world to identify the compounders that are likely to deliver double digit returns. 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. With all of this in mind we’re going to check out the key hedge fund action encompassing Profound Medical Corp. (NASDAQ:PROF).

How are hedge funds trading Profound Medical Corp. (NASDAQ:PROF)?

Heading into the second quarter of 2020, a total of 8 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 167% from the fourth quarter of 2019. The graph below displays the number of hedge funds with bullish position in PROF over the last 18 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Pura Vida Investments held the most valuable stake in Profound Medical Corp. (NASDAQ:PROF), which was worth $5.3 million at the end of the third quarter. On the second spot was Redmile Group which amassed $3.9 million worth of shares. Royce & Associates, Blackcrane Capital, and Alyeska Investment Group 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 Blackcrane Capital allocated the biggest weight to Profound Medical Corp. (NASDAQ:PROF), around 1.98% of its 13F portfolio. Pura Vida Investments is also relatively very bullish on the stock, dishing out 1.35 percent of its 13F equity portfolio to PROF.

As aggregate interest increased, some big names have been driving this bullishness. Pura Vida Investments, managed by Efrem Kamen, initiated the most valuable position in Profound Medical Corp. (NASDAQ:PROF). Pura Vida Investments had $5.3 million invested in the company at the end of the quarter. Jeremy Green’s Redmile Group also made a $3.9 million investment in the stock during the quarter. The other funds with brand new PROF positions are Daniel Kim’s Blackcrane Capital, Anand Parekh’s Alyeska Investment Group, and Israel Englander’s Millennium Management.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Profound Medical Corp. (NASDAQ:PROF) but similarly valued. These stocks are Alpha and Omega Semiconductor Ltd (NASDAQ:AOSL), CONSOL Coal Resources LP (NYSE:CCR), Atlanticus Holdings Corp (NASDAQ:ATLC), and Kindred Biosciences Inc (NASDAQ:KIN). This group of stocks’ market valuations match PROF’s market valuation.

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As you can see these stocks had an average of 6 hedge funds with bullish positions and the average amount invested in these stocks was $26 million. That figure was $17 million in PROF’s case. Alpha and Omega Semiconductor Ltd (NASDAQ:AOSL) is the most popular stock in this table. On the other hand CONSOL Coal Resources LP (NYSE:CCR) is the least popular one with only 2 bullish hedge fund positions. Profound Medical Corp. (NASDAQ:PROF) is not the most popular stock in this group but hedge fund interest is still above average. 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 12.2% in 2020 through June 17th but still beat the market by 14.8 percentage points. Hedge funds were also right about betting on PROF as the stock returned 27.8% in Q2 (through June 17th) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

Disclosure: None. This article was originally published at Insider Monkey.