At Insider Monkey we follow around 700 of the best-performing investors and even though many of them lost money in the last couple of months (70% of hedge funds lost money in October whereas S&P 500 ETF lost about 7%), the history teaches us that over the long-run they still manage to beat the market, which is why it can be profitable for us to imitate their activity. Of course, even the best money managers can sometimes get it wrong, but following some of their picks gives us a better chance to outperform the crowd than picking a random stock and this is where our research comes in.
Is HealthStream, Inc. (NASDAQ:HSTM) a buy here? Investors who are in the know are getting less optimistic. The number of long hedge fund positions went down by 4 lately. Our calculations also showed that HSTM isn’t among the 30 most popular stocks among hedge funds. HSTM was in 11 hedge funds’ portfolios at the end of the third quarter of 2018. There were 15 hedge funds in our database with HSTM holdings at the end of the previous quarter.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 18 percentage points since May 2014 through December 3, 2018 (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 24% through December 3, 2018. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
We’re going to go over the new hedge fund action encompassing HealthStream, Inc. (NASDAQ:HSTM).
Hedge fund activity in HealthStream, Inc. (NASDAQ:HSTM)
At the end of the third quarter, a total of 11 of the hedge funds tracked by Insider Monkey were long this stock, a change of -27% from the previous quarter. On the other hand, there were a total of 12 hedge funds with a bullish position in HSTM at the beginning of this year. So, let’s see 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, Renaissance Technologies, managed by Jim Simons, holds the number one position in HealthStream, Inc. (NASDAQ:HSTM). Renaissance Technologies has a $10.2 million position in the stock, comprising less than 0.1%% of its 13F portfolio. Coming in second is D E Shaw, managed by D. E. Shaw, which holds a $8.3 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Some other professional money managers that are bullish encompass Paul Hondros’s AlphaOne Capital Partners, Noam Gottesman’s GLG Partners and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital.
Since HealthStream, Inc. (NASDAQ:HSTM) has faced declining sentiment from the entirety of the hedge funds we track, it’s easy to see that there is a sect of hedgies who were dropping their positions entirely last quarter. It’s worth mentioning that Michael Platt and William Reeves’s BlueCrest Capital Mgmt. dropped the largest position of all the hedgies followed by Insider Monkey, comprising an estimated $0.4 million in stock, and Matthew Tewksbury’s Stevens Capital Management was right behind this move, as the fund dropped about $0.3 million worth. These moves are interesting, as aggregate hedge fund interest dropped by 4 funds last quarter.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as HealthStream, Inc. (NASDAQ:HSTM) but similarly valued. These stocks are NCI Building Systems, Inc. (NYSE:NCS), Triumph Bancorp Inc (NASDAQ:TBK), Apellis Pharmaceuticals, Inc. (NASDAQ:APLS), and Coeur Mining, Inc. (NYSE:CDE). This group of stocks’ market values are closest to HSTM’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| NCS | 28 | 151081 | 10 |
| TBK | 7 | 103874 | -6 |
| APLS | 14 | 255091 | 2 |
| CDE | 13 | 57796 | 1 |
| Average | 15.5 | 141961 | 1.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 15.5 hedge funds with bullish positions and the average amount invested in these stocks was $142 million. That figure was $47 million in HSTM’s case. NCI Building Systems, Inc. (NYSE:NCS) is the most popular stock in this table. On the other hand Triumph Bancorp Inc (NASDAQ:TBK) is the least popular one with only 7 bullish hedge fund positions. HealthStream, Inc. (NASDAQ:HSTM) 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. In this regard NCS might be a better candidate to consider a long position.
Disclosure: None. This article was originally published at Insider Monkey.
