Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors’ consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of Heska Corp (NASDAQ:HSKA).
Heska Corp (NASDAQ:HSKA) was in 15 hedge funds’ portfolios at the end of the first quarter of 2020. HSKA shareholders have witnessed an increase in support from the world’s most elite money managers recently. There were 13 hedge funds in our database with HSKA holdings at the end of the previous quarter. Our calculations also showed that HSKA isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 S&P 500 ETFs by more than 58 percentage points since March 2017 (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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
Phill Gross of Adage Capital Management
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, blockchain technology’s influence will go beyond online payments. So, we are checking out this futurist’s moonshot opportunities in tech stocks. We interview hedge fund managers and ask them about their best ideas. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Now let’s view the recent hedge fund action surrounding Heska Corp (NASDAQ:HSKA).
What have hedge funds been doing with Heska Corp (NASDAQ:HSKA)?
At the end of the first quarter, a total of 15 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 15% from the fourth quarter of 2019. The graph below displays the number of hedge funds with bullish position in HSKA over the last 18 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were adding to their holdings meaningfully (or already accumulated large positions).
More specifically, Nine Ten Partners was the largest shareholder of Heska Corp (NASDAQ:HSKA), with a stake worth $18.7 million reported as of the end of September. Trailing Nine Ten Partners was Millennium Management, which amassed a stake valued at $10 million. Adage Capital Management, Park West Asset Management, and Citadel Investment Group 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 Nine Ten Partners allocated the biggest weight to Heska Corp (NASDAQ:HSKA), around 7.47% of its 13F portfolio. SG Capital Management is also relatively very bullish on the stock, designating 0.87 percent of its 13F equity portfolio to HSKA.
As industrywide interest jumped, some big names were breaking ground themselves. Adage Capital Management, managed by Phill Gross and Robert Atchinson, initiated the largest position in Heska Corp (NASDAQ:HSKA). Adage Capital Management had $4.1 million invested in the company at the end of the quarter. Peter S. Park’s Park West Asset Management also initiated a $3.8 million position during the quarter. The other funds with brand new HSKA positions are Renaissance Technologies and Greg Eisner’s Engineers Gate Manager.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Heska Corp (NASDAQ:HSKA) but similarly valued. We will take a look at Neoleukin Therapeutics, Inc. (NASDAQ:NLTX), Cellcom Israel Ltd. (NYSE:CEL), DBV Technologies SA (NASDAQ:DBVT), and World Acceptance Corp. (NASDAQ:WRLD). This group of stocks’ market values are closest to HSKA’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| NLTX | 20 | 197499 | 0 |
| CEL | 1 | 11104 | -1 |
| DBVT | 10 | 115317 | -3 |
| WRLD | 13 | 101286 | -1 |
| Average | 11 | 106302 | -1.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 11 hedge funds with bullish positions and the average amount invested in these stocks was $106 million. That figure was $50 million in HSKA’s case. Neoleukin Therapeutics, Inc. (NASDAQ:NLTX) is the most popular stock in this table. On the other hand Cellcom Israel Ltd. (NYSE:CEL) is the least popular one with only 1 bullish hedge fund positions. Heska Corp (NASDAQ:HSKA) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 13.3% in 2020 through June 25th but still beat the market by 16.8 percentage points. Hedge funds were also right about betting on HSKA as the stock returned 65.8% in Q2 (through June 25th) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.
