Hedge funds are not perfect. They have their bad picks just like everyone else. Facebook, a stock hedge funds have loved dearly, lost nearly 40% of its value at one point in 2018. Although hedge funds are not perfect, their consensus picks do deliver solid returns, however. Our data show the top 20 S&P 500 stocks among hedge funds beat the S&P 500 Index by nearly 10 percentage points so far in 2019. Because hedge funds have a lot of resources and their consensus picks do well, we pay attention to what they think. In this article, we analyze what the elite funds think of NantHealth, Inc. (NASDAQ:NH).
NantHealth, Inc. (NASDAQ:NH) shareholders have witnessed an increase in enthusiasm from smart money in recent months. Our calculations also showed that NH 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 Discover is offering this insane cashback card, so we look into shorting the stock. 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 even check out this option genius’ weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock already gained 20 percent. Now we’re going to take a look at the recent hedge fund action encompassing NantHealth, Inc. (NASDAQ:NH).
Hedge fund activity in NantHealth, Inc. (NASDAQ:NH)
At Q3’s end, a total of 7 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 40% from the second quarter of 2019. The graph below displays the number of hedge funds with bullish position in NH over the last 17 quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were upping their stakes considerably (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Renaissance Technologies, founded by Jim Simons, holds the biggest position in NantHealth, Inc. (NASDAQ:NH). Renaissance Technologies has a $0.3 million position in the stock, comprising less than 0.1%% of its 13F portfolio. Sitting at the No. 2 spot is Highbridge Capital Management, founded by Glenn Russell Dubin, holding a $0.2 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Some other peers that are bullish comprise Israel Englander’s Millennium Management, Leonard A. Potter’s Wildcat Capital Management and Michael Gelband’s ExodusPoint Capital. In terms of the portfolio weights assigned to each position Wildcat Capital Management allocated the biggest weight to NantHealth, Inc. (NASDAQ:NH), around 0.03% of its 13F portfolio. Highbridge Capital Management is also relatively very bullish on the stock, designating 0.02 percent of its 13F equity portfolio to NH.
As industrywide interest jumped, some big names were leading the bulls’ herd. ExodusPoint Capital, managed by Michael Gelband, assembled the most valuable position in NantHealth, Inc. (NASDAQ:NH). ExodusPoint Capital had $0.1 million invested in the company at the end of the quarter. Ken Griffin’s Citadel Investment Group also made a $0 million investment in the stock during the quarter.
Let’s go over hedge fund activity in other stocks similar to NantHealth, Inc. (NASDAQ:NH). These stocks are Entasis Therapeutics Holdings Inc. (NASDAQ:ETTX), Sears Hometown and Outlet Stores Inc (NASDAQ:SHOS), Arotech Corporation (NASDAQ:ARTX), and Community First Bancshares, Inc. (NASDAQ:CFBI). This group of stocks’ market values are closest to NH’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ETTX | 2 | 8151 | 0 |
| SHOS | 7 | 25475 | -1 |
| ARTX | 8 | 11444 | 2 |
| CFBI | 1 | 680 | 0 |
| Average | 4.5 | 11438 | 0.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 4.5 hedge funds with bullish positions and the average amount invested in these stocks was $11 million. That figure was $1 million in NH’s case. Arotech Corporation (NASDAQ:ARTX) is the most popular stock in this table. On the other hand Community First Bancshares, Inc. (NASDAQ:CFBI) is the least popular one with only 1 bullish hedge fund positions. NantHealth, Inc. (NASDAQ:NH) 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 NH as the stock returned 64.3% during the fourth quarter (through the end of November) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.
