It seems that the masses and most of the financial media hate hedge funds and what they do, but why is this hatred of hedge funds so prominent? At the end of the day, these asset management firms do not gamble the hard-earned money of the people who are on the edge of poverty. Truth be told, most hedge fund managers and other smaller players within this industry are very smart and skilled investors. Of course, they may also make wrong bets in some instances, but no one knows what the future holds and how market participants will react to the bountiful news that floods in each day. The Standard and Poor’s 500 Index returned approximately 12.1% in the first 5 months of this year (through May 30th). Conversely, hedge funds’ top 20 large-cap stock picks generated a return of 18.7% during the same 5-month period, with the majority of these stock picks outperforming the broader market benchmark. Coincidence? It might happen to be so, but it is unlikely. Our research covering the last 18 years indicates that hedge funds’ stock picks generate superior risk-adjusted returns. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like Camtek LTD. (NASDAQ:CAMT).
Hedge fund interest in Camtek LTD. (NASDAQ:CAMT) shares was flat at the end of last quarter. This is usually a negative indicator. 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 BSB Bancorp Inc (NASDAQ:BLMT), Standard Diversified Inc. (NYSE:SDI), and Orchid Island Capital, Inc. (NYSE:ORC) to gather more data points.
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 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 40 percentage points since May 2014 through May 30, 2019 (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 30.9% through May 30, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Let’s take a peek at the recent hedge fund action regarding Camtek LTD. (NASDAQ:CAMT).
What does smart money think about Camtek LTD. (NASDAQ:CAMT)?
Heading into the second quarter of 2019, a total of 10 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the previous quarter. By comparison, 4 hedge funds held shares or bullish call options in CAMT a year ago. With hedgies’ sentiment swirling, there exists a select group of key hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).
More specifically, Renaissance Technologies was the largest shareholder of Camtek LTD. (NASDAQ:CAMT), with a stake worth $16.3 million reported as of the end of March. Trailing Renaissance Technologies was Millennium Management, which amassed a stake valued at $2.3 million. Two Sigma Advisors, Navellier & Associates, and D E Shaw were also very fond of the stock, giving the stock large weights in their portfolios.
Judging by the fact that Camtek LTD. (NASDAQ:CAMT) has experienced bearish sentiment from the entirety of the hedge funds we track, it’s safe to say that there were a few hedge funds that slashed their positions entirely in the third quarter. Interestingly, Ken Griffin’s Citadel Investment Group said goodbye to the biggest investment of the 700 funds followed by Insider Monkey, comprising about $0.3 million in stock, and Matthew Hulsizer’s PEAK6 Capital Management was right behind this move, as the fund cut about $0.1 million worth. These moves are intriguing to say the least, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Camtek LTD. (NASDAQ:CAMT) but similarly valued. These stocks are BSB Bancorp Inc (NASDAQ:BLMT), Standard Diversified Inc. (NYSE:SDI), Orchid Island Capital, Inc. (NYSE:ORC), and Select Interior Concepts, Inc. (NASDAQ:SIC). This group of stocks’ market values resemble CAMT’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| BLMT | 7 | 28681 | 1 |
| SDI | 3 | 6001 | 0 |
| ORC | 3 | 7254 | -3 |
| SIC | 6 | 36399 | -1 |
| Average | 4.75 | 19584 | -0.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 4.75 hedge funds with bullish positions and the average amount invested in these stocks was $20 million. That figure was $23 million in CAMT’s case. BSB Bancorp Inc (NASDAQ:BLMT) is the most popular stock in this table. On the other hand Standard Diversified Inc. (NYSE:SDI) is the least popular one with only 3 bullish hedge fund positions. Compared to these stocks Camtek LTD. (NASDAQ:CAMT) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. Unfortunately CAMT wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on CAMT were disappointed as the stock returned -3.6% during the same period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 13 of these stocks already outperformed the market in Q2.
Disclosure: None. This article was originally published at Insider Monkey.