How do we determine whether GenMark Diagnostics, Inc (NASDAQ:GNMK) 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.
Hedge fund interest in GenMark Diagnostics, Inc (NASDAQ:GNMK) shares was flat at the end of last quarter. This is usually a negative indicator. At the end of this article we will also compare GNMK to other stocks including Enterprise Bancorp, Inc (NASDAQ:EBTC), Citizens, Inc. (NYSE:CIA), and Global Medical REIT Inc. (NYSE:GMRE) to get a better sense of its popularity.
Video: Click the image to 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 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 25.7% through September 30, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We’re going to go over the recent hedge fund action surrounding GenMark Diagnostics, Inc (NASDAQ:GNMK).
How have hedgies been trading GenMark Diagnostics, Inc (NASDAQ:GNMK)?
At Q2’s end, a total of 14 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in GNMK over the last 16 quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists an “upper tier” of noteworthy hedge fund managers who were upping their holdings substantially (or already accumulated large positions).
The largest stake in GenMark Diagnostics, Inc (NASDAQ:GNMK) was held by Cadian Capital, which reported holding $36.6 million worth of stock at the end of March. It was followed by Casdin Capital with a $21.8 million position. Other investors bullish on the company included Millennium Management, Alyeska Investment Group, and Renaissance Technologies.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Element Capital Management. One hedge fund selling its entire position doesn’t always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don’t think this is the case in this case because only one of the 800+ hedge funds tracked by Insider Monkey identified as a viable investment and initiated a position in the stock (that fund was Tudor Investment Corp).
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as GenMark Diagnostics, Inc (NASDAQ:GNMK) but similarly valued. We will take a look at Enterprise Bancorp, Inc (NASDAQ:EBTC), Citizens, Inc. (NYSE:CIA), Global Medical REIT Inc. (NYSE:GMRE), and Capital Southwest Corporation (NASDAQ:CSWC). This group of stocks’ market valuations are similar to GNMK’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| EBTC | 1 | 1498 | 0 |
| CIA | 2 | 2171 | 0 |
| GMRE | 13 | 16801 | -3 |
| CSWC | 10 | 46735 | 3 |
| Average | 6.5 | 16801 | 0 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 6.5 hedge funds with bullish positions and the average amount invested in these stocks was $17 million. That figure was $75 million in GNMK’s case. Global Medical REIT Inc. (NYSE:GMRE) is the most popular stock in this table. On the other hand Enterprise Bancorp, Inc (NASDAQ:EBTC) is the least popular one with only 1 bullish hedge fund positions. Compared to these stocks GenMark Diagnostics, Inc (NASDAQ:GNMK) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately GNMK wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on GNMK were disappointed as the stock returned -6.6% during the third 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 20 most popular stocks among hedge funds as many of these stocks already outperformed the market in Q3.
Disclosure: None. This article was originally published at Insider Monkey.
