Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips or bumps on the charts, usually don’t make them change their opinion towards a company. This time it may be different. During the fourth quarter of 2018 we observed increased volatility and a 20% drop in stock prices. Things completely reversed in 2019 and stock indices hit record highs. Recent hedge fund investor letters indicated that they are cutting their overall exposure, closing out some position and doubling down on others. Let’s take a look at the hedge fund sentiment towards Alphatec Holdings Inc (NASDAQ:ATEC) to find out whether it was one of their high conviction long-term ideas.
Is Alphatec Holdings Inc (NASDAQ:ATEC) ready to rally soon? The smart money is taking a bullish view. The number of long hedge fund bets went up by 3 in recent months. Our calculations also showed that ATEC 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.
Today there are plenty of methods market participants have at their disposal to analyze their holdings. A pair of the best methods are hedge fund and insider trading activity. Our researchers have shown that, historically, those who follow the best picks of the best money managers can beat their index-focused peers by a healthy margin (see the details here).
Richard Driehaus of Driehaus Capital
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. 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 also rely on the best performing hedge funds‘ buy/sell signals. Let’s analyze the recent hedge fund action encompassing Alphatec Holdings Inc (NASDAQ:ATEC).
What does smart money think about Alphatec Holdings Inc (NASDAQ:ATEC)?
At Q3’s end, a total of 8 of the hedge funds tracked by Insider Monkey were long this stock, a change of 60% from one quarter earlier. On the other hand, there were a total of 7 hedge funds with a bullish position in ATEC a year ago. With the smart money’s positions undergoing their usual ebb and flow, there exists an “upper tier” of noteworthy hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).
Among these funds, Driehaus Capital held the most valuable stake in Alphatec Holdings Inc (NASDAQ:ATEC), which was worth $9.5 million at the end of the third quarter. On the second spot was Archon Capital Management which amassed $8 million worth of shares. Perceptive Advisors, Royce & Associates, and Millennium 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 Archon Capital Management allocated the biggest weight to Alphatec Holdings Inc (NASDAQ:ATEC), around 1.9% of its 13F portfolio. Driehaus Capital is also relatively very bullish on the stock, setting aside 0.31 percent of its 13F equity portfolio to ATEC.
Consequently, key money managers were breaking ground themselves. Driehaus Capital, managed by Richard Driehaus, created the most outsized position in Alphatec Holdings Inc (NASDAQ:ATEC). Driehaus Capital had $9.5 million invested in the company at the end of the quarter. Joseph Edelman’s Perceptive Advisors also made a $4.3 million investment in the stock during the quarter. The other funds with brand new ATEC positions are James E. Flynn’s Deerfield Management and Cliff Asness’s AQR Capital Management.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Alphatec Holdings Inc (NASDAQ:ATEC) but similarly valued. These stocks are Alpha and Omega Semiconductor Ltd (NASDAQ:AOSL), Alerus Financial Corporation (NASDAQ:ALRS), The First Bancorp, Inc. (NASDAQ:FNLC), and Dynavax Technologies Corporation (NASDAQ:DVAX). This group of stocks’ market caps resemble ATEC’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| AOSL | 14 | 45381 | 4 |
| ALRS | 3 | 6849 | 3 |
| FNLC | 1 | 6125 | 0 |
| DVAX | 13 | 46396 | 1 |
| Average | 7.75 | 26188 | 2 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 7.75 hedge funds with bullish positions and the average amount invested in these stocks was $26 million. That figure was $34 million in ATEC’s case. Alpha and Omega Semiconductor Ltd (NASDAQ:AOSL) is the most popular stock in this table. On the other hand The First Bancorp, Inc. (NASDAQ:FNLC) is the least popular one with only 1 bullish hedge fund positions. Alphatec Holdings Inc (NASDAQ:ATEC) 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 ATEC as the stock returned 40.4% 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.
