At Insider Monkey, we pore over the filings of nearly 750 top investment firms every quarter, a process we have now completed for the latest reporting period. The data we’ve gathered as a result gives us access to a wealth of collective knowledge based on these firms’ portfolio holdings as of September 30. In this article, we will use that wealth of knowledge to determine whether or not Fonar Corporation (NASDAQ:FONR) makes for a good investment right now.
Is Fonar Corporation (NASDAQ:FONR) going to take off soon? The best stock pickers are betting on the stock. The number of bullish hedge fund positions inched up by 1 recently. Our calculations also showed that FONR 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.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
John Overdeck of Two Sigma Advisors
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 let’s view the new hedge fund action regarding Fonar Corporation (NASDAQ:FONR).
How have hedgies been trading Fonar Corporation (NASDAQ:FONR)?
At the end of the third quarter, a total of 9 of the hedge funds tracked by Insider Monkey were long this stock, a change of 13% from the second quarter of 2019. The graph below displays the number of hedge funds with bullish position in FONR over the last 17 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Renaissance Technologies held the most valuable stake in Fonar Corporation (NASDAQ:FONR), which was worth $11 million at the end of the third quarter. On the second spot was GLG Partners which amassed $0.9 million worth of shares. Millennium Management, Winton Capital Management, and Two Sigma Advisors 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 Renaissance Technologies allocated the biggest weight to Fonar Corporation (NASDAQ:FONR), around 0.01% of its 13F portfolio. Winton Capital Management is also relatively very bullish on the stock, designating 0.01 percent of its 13F equity portfolio to FONR.
With a general bullishness amongst the heavyweights, key hedge funds were leading the bulls’ herd. Winton Capital Management, managed by David Harding, assembled the most valuable position in Fonar Corporation (NASDAQ:FONR). Winton Capital Management had $0.6 million invested in the company at the end of the quarter.
Let’s go over hedge fund activity in other stocks similar to Fonar Corporation (NASDAQ:FONR). These stocks are Acacia Research Corporation (NASDAQ:ACTG), Townsquare Media Inc (NYSE:TSQ), Tyme Technologies, Inc. (NASDAQ:TYME), and Orion Group Holdings, Inc. (NYSE:ORN). This group of stocks’ market caps resemble FONR’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ACTG | 12 | 20237 | 1 |
| TSQ | 5 | 27369 | -1 |
| TYME | 6 | 2841 | 0 |
| ORN | 7 | 9906 | 1 |
| Average | 7.5 | 15088 | 0.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 7.5 hedge funds with bullish positions and the average amount invested in these stocks was $15 million. That figure was $14 million in FONR’s case. Acacia Research Corporation (NASDAQ:ACTG) is the most popular stock in this table. On the other hand Townsquare Media Inc (NYSE:TSQ) is the least popular one with only 5 bullish hedge fund positions. Fonar Corporation (NASDAQ:FONR) 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 FONR wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on FONR were disappointed as the stock returned -3.9% 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.