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.
Addus Homecare Corporation (NASDAQ:ADUS) was in 23 hedge funds’ portfolios at the end of September. ADUS investors should pay attention to an increase in activity from the world’s largest hedge funds in recent months. There were 17 hedge funds in our database with ADUS positions at the end of the previous quarter. Our calculations also showed that ADUS 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.
At the moment there are numerous signals investors put to use to appraise their holdings. Some of the best signals are hedge fund and insider trading indicators. Our researchers have shown that, historically, those who follow the best picks of the elite fund managers can outpace the market by a very impressive amount (see the details here).
Paul Marshall of Marshall Wace
Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world’s most bearish hedge fund that’s more convinced than ever that a crash is coming, our long-short investment strategy doesn’t rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds‘ buy/sell signals. Let’s take a glance at the latest hedge fund action encompassing Addus Homecare Corporation (NASDAQ:ADUS).
How have hedgies been trading Addus Homecare Corporation (NASDAQ:ADUS)?
Heading into the fourth quarter of 2019, a total of 23 of the hedge funds tracked by Insider Monkey were long this stock, a change of 35% from the previous quarter. By comparison, 18 hedge funds held shares or bullish call options in ADUS a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Cloverdale Capital Management held the most valuable stake in Addus Homecare Corporation (NASDAQ:ADUS), which was worth $23.9 million at the end of the third quarter. On the second spot was Marshall Wace which amassed $20.3 million worth of shares. Deerfield Management, Polar Capital, and Point72 Asset Management 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 Cloverdale Capital Management allocated the biggest weight to Addus Homecare Corporation (NASDAQ:ADUS), around 16.2% of its portfolio. Cruiser Capital Advisors is also relatively very bullish on the stock, designating 4.48 percent of its 13F equity portfolio to ADUS.
Consequently, specific money managers have been driving this bullishness. Cloverdale Capital Management, managed by C. Jonathan Gattman, established the biggest position in Addus Homecare Corporation (NASDAQ:ADUS). Cloverdale Capital Management had $23.9 million invested in the company at the end of the quarter. Benjamin A. Smith’s Laurion Capital Management also made a $3.6 million investment in the stock during the quarter. The other funds with new positions in the stock are Ira Unschuld’s Brant Point Investment Management, Michael O’Keefe’s 12th Street Asset Management, and Anand Parekh’s Alyeska Investment Group.
Let’s also examine hedge fund activity in other stocks similar to Addus Homecare Corporation (NASDAQ:ADUS). We will take a look at Talend S.A. (NASDAQ:TLND), Omega Flex, Inc. (NASDAQ:OFLX), Granite Point Mortgage Trust Inc. (NYSE:GPMT), and Chase Corporation (NYSE:CCF). This group of stocks’ market valuations match ADUS’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| TLND | 28 | 421421 | 4 |
| OFLX | 4 | 5556 | 1 |
| GPMT | 6 | 13231 | -3 |
| CCF | 7 | 86633 | -1 |
| Average | 11.25 | 131710 | 0.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 11.25 hedge funds with bullish positions and the average amount invested in these stocks was $132 million. That figure was $159 million in ADUS’s case. Talend S.A. (NASDAQ:TLND) is the most popular stock in this table. On the other hand Omega Flex, Inc. (NASDAQ:OFLX) is the least popular one with only 4 bullish hedge fund positions. Addus Homecare Corporation (NASDAQ:ADUS) 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 ADUS as the stock returned 17.6% 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.
