Is Titan Medical Inc. (NASDAQ:TMDI) a good stock to buy right now? We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.
Titan Medical Inc. (NASDAQ:TMDI) was in 4 hedge funds’ portfolios at the end of September. TMDI investors should pay attention to an increase in hedge fund sentiment lately. There were 2 hedge funds in our database with TMDI holdings at the end of the previous quarter. Our calculations also showed that TMDI 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.
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’ 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.
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. With all of this in mind, we’re going to view the latest hedge fund action surrounding Titan Medical Inc. (NASDAQ:TMDI).
How are hedge funds trading Titan Medical Inc. (NASDAQ:TMDI)?
At the end of the third quarter, a total of 4 of the hedge funds tracked by Insider Monkey were long this stock, a change of 100% from the previous quarter. The graph below displays the number of hedge funds with bullish position in TMDI over the last 17 quarters. With hedge funds’ sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were increasing their holdings substantially (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Mike Masters’s Masters Capital Management has the biggest position in Titan Medical Inc. (NASDAQ:TMDI), worth close to $1.3 million, amounting to 0.1% of its total 13F portfolio. On Masters Capital Management’s heels is Two Sigma Advisors, managed by John Overdeck and David Siegel, which holds a $0.1 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Other peers with similar optimism contain Ken Griffin’s Citadel Investment Group, Hal Mintz’s Sabby Capital and in terms of the portfolio weights assigned to each position, Masters Capital Management allocated the biggest weight to Titan Medical Inc. (NASDAQ:TMDI), around 0.08% of its 13F portfolio. Sabby Capital is also relatively very bullish on the stock, earmarking 0.02 percent of its 13F equity portfolio to TMDI.
As one would reasonably expect, specific money managers were leading the bulls’ herd. Two Sigma Advisors, managed by John Overdeck and David Siegel, assembled the largest position in Titan Medical Inc. (NASDAQ:TMDI). Two Sigma Advisors had $0.1 million invested in the company at the end of the quarter. Ken Griffin’s Citadel Investment Group also made a $0.1 million investment in the stock during the quarter.
Let’s now review hedge fund activity in other stocks similar to Titan Medical Inc. (NASDAQ:TMDI). We will take a look at Organovo Holdings Inc (NYSE:ONVO), Gulf Resources, Inc. (NASDAQ:GURE), Diana Containerships Inc (NASDAQ:DCIX), and Celsion Corporation (NASDAQ:CLSN). This group of stocks’ market values match TMDI’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ONVO | 8 | 1998 | 2 |
| GURE | 1 | 1276 | -1 |
| DCIX | 1 | 185 | 0 |
| CLSN | 3 | 316 | 1 |
| Average | 3.25 | 944 | 0.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 3.25 hedge funds with bullish positions and the average amount invested in these stocks was $1 million. That figure was $1 million in TMDI’s case. Organovo Holdings Inc (NYSE:ONVO) is the most popular stock in this table. On the other hand, Gulf Resources, Inc. (NASDAQ:GURE) is the least popular one with only 1 bullish hedge fund position. Titan Medical Inc. (NASDAQ:TMDI) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. 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. Unfortunately, TMDI wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on TMDI were disappointed as the stock returned -42.6% during the fourth quarter (through the end of November) 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 so far this year.
Disclosure: None. This article was originally published at Insider Monkey.