How do we determine whether ADMA Biologics Inc (NASDAQ:ADMA) makes for a good investment at the moment? We analyze the sentiment of a select group of the very best investors in the world, who spend immense amounts of time and resources studying companies. They may not always be right (no one is), but data shows that their consensus long positions have historically outperformed the market when we adjust for known risk factors.
ADMA Biologics Inc (NASDAQ:ADMA) shareholders have witnessed an increase in support from the world’s most elite money managers lately. ADMA was in 11 hedge funds’ portfolios at the end of September. There were 10 hedge funds in our database with ADMA positions at the end of the previous quarter. Our calculations also showed that ADMA isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to 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 Russell 2000 ETFs by 40 percentage points since May 2014 (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.
Ken Griffin of Citadel Investment Group
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds‘ buy/sell signals. We’re going to review the recent hedge fund action surrounding ADMA Biologics Inc (NASDAQ:ADMA).
How have hedgies been trading ADMA Biologics Inc (NASDAQ:ADMA)?
Heading into the fourth quarter of 2019, a total of 11 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 10% from one quarter earlier. On the other hand, there were a total of 10 hedge funds with a bullish position in ADMA a year ago. With the smart money’s sentiment swirling, there exists an “upper tier” of notable hedge fund managers who were adding to their holdings meaningfully (or already accumulated large positions).
More specifically, Perceptive Advisors was the largest shareholder of ADMA Biologics Inc (NASDAQ:ADMA), with a stake worth $51.3 million reported as of the end of September. Trailing Perceptive Advisors was Consonance Capital Management, which amassed a stake valued at $22.8 million. Aisling Capital, 683 Capital Partners, and Millennium Management 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 Aisling Capital allocated the biggest weight to ADMA Biologics Inc (NASDAQ:ADMA), around 35.46% of its 13F portfolio. Consonance Capital Management is also relatively very bullish on the stock, earmarking 2.25 percent of its 13F equity portfolio to ADMA.
Now, specific money managers have jumped into ADMA Biologics Inc (NASDAQ:ADMA) headfirst. Magnetar Capital, managed by Alec Litowitz and Ross Laser, created the most valuable position in ADMA Biologics Inc (NASDAQ:ADMA). Magnetar Capital had $0.2 million invested in the company at the end of the quarter. Ken Griffin’s Citadel Investment Group also initiated a $0.1 million position during the quarter. The only other fund with a new position in the stock is David Harding’s Winton Capital Management.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as ADMA Biologics Inc (NASDAQ:ADMA) but similarly valued. We will take a look at Bluerock Residential Growth REIT Inc (NYSEAMERICAN:BRG), Jumei International Holding Ltd (NYSE:JMEI), ChannelAdvisor Corp (NYSE:ECOM), and National Bankshares Inc. (NASDAQ:NKSH). This group of stocks’ market caps resemble ADMA’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| BRG | 13 | 26088 | 2 |
| JMEI | 3 | 8671 | -3 |
| ECOM | 13 | 46926 | -1 |
| NKSH | 2 | 21129 | -1 |
| Average | 7.75 | 25704 | -0.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 7.75 hedge funds with bullish positions and the average amount invested in these stocks was $26 million. That figure was $106 million in ADMA’s case. Bluerock Residential Growth REIT Inc (NYSE:BRG) is the most popular stock in this table. On the other hand National Bankshares Inc. (NASDAQ:NKSH) is the least popular one with only 2 bullish hedge fund positions. ADMA Biologics Inc (NASDAQ:ADMA) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Hedge funds were also right about betting on ADMA, though not to the same extent, as the stock returned 6.7% during the first two months of the fourth quarter and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.
