Amid an overall bull market, many stocks that smart money investors were collectively bullish on surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Our research shows that most of the stocks that smart money likes historically generate strong risk-adjusted returns. That’s why we weren’t surprised when hedge funds’ top 20 large-cap stock picks generated a return of 37.6% in 2019 (through the end of November) and outperformed the broader market benchmark by 9.9 percentage points.This is why following the smart money sentiment is a useful tool at identifying the next stock to invest in.
Hedge fund interest in Tyme Technologies, Inc. (NASDAQ:TYME) 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 Orion Marine Group, Inc. (NYSE:ORN), Condor Hospitality Trust, Inc. (NASDAQ:CDOR), and Mustang Bio, Inc. (NASDAQ:MBIO) to gather more data points. Our calculations also showed that TYME 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.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 91% since May 2014 and outperformed the Russell 2000 ETFs by nearly 40 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Louis Bacon Moore of Moore Capital
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 check out the new hedge fund action surrounding Tyme Technologies, Inc. (NASDAQ:TYME).
How are hedge funds trading Tyme Technologies, Inc. (NASDAQ:TYME)?
At the end of the third quarter, a total of 6 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the second quarter of 2019. On the other hand, there were a total of 6 hedge funds with a bullish position in TYME a year ago. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).
More specifically, Healthcare Value Capital was the largest shareholder of Tyme Technologies, Inc. (NASDAQ:TYME), with a stake worth $2.6 million reported as of the end of September. Trailing Healthcare Value Capital was Moore Global Investments, which amassed a stake valued at $0.2 million. Citadel Investment Group, Millennium Management, and LMR Partners 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 Healthcare Value Capital allocated the biggest weight to Tyme Technologies, Inc. (NASDAQ:TYME), around 4.67% of its 13F portfolio. Moore Global Investments is also relatively very bullish on the stock, setting aside 0.01 percent of its 13F equity portfolio to TYME.
Seeing as Tyme Technologies, Inc. (NASDAQ:TYME) has faced declining sentiment from the entirety of the hedge funds we track, it’s easy to see that there was a specific group of hedge funds that elected to cut their entire stakes last quarter. It’s worth mentioning that Sander Gerber’s Hudson Bay Capital Management dumped the largest position of all the hedgies tracked by Insider Monkey, comprising close to $1.1 million in stock, and Donald Sussman’s Paloma Partners was right behind this move, as the fund sold off about $0.2 million worth. These transactions are interesting, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Tyme Technologies, Inc. (NASDAQ:TYME) but similarly valued. These stocks are Orion Marine Group, Inc. (NYSE:ORN), Condor Hospitality Trust, Inc. (NASDAQ:CDOR), Mustang Bio, Inc. (NASDAQ:MBIO), and County Bancorp, Inc. (NASDAQ:ICBK). This group of stocks’ market values resemble TYME’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ORN | 7 | 9906 | 1 |
| CDOR | 5 | 5777 | 3 |
| MBIO | 6 | 15947 | 0 |
| ICBK | 6 | 11470 | 1 |
| Average | 6 | 10775 | 1.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 6 hedge funds with bullish positions and the average amount invested in these stocks was $11 million. That figure was $3 million in TYME’s case. Orion Marine Group, Inc. (NYSE:ORN) is the most popular stock in this table. On the other hand Condor Hospitality Trust, Inc. (NASDAQ:CDOR) is the least popular one with only 5 bullish hedge fund positions. Tyme Technologies, Inc. (NASDAQ:TYME) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and 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 TYME wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); TYME investors were disappointed as the stock returned -5% during the first two months of the fourth 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 70 percent of these stocks already outperformed the market in Q4.
Disclosure: None. This article was originally published at Insider Monkey.