Hedge funds are known to underperform the bull markets but that’s not because they are bad at investing. Truth be told, most hedge fund managers and other smaller players within this industry are very smart and skilled investors. Of course, they may also make wrong bets in some instances, but no one knows what the future holds and how market participants will react to the bountiful news that floods in each day. Hedge funds underperform because they are hedged. The Standard and Poor’s 500 Total Return Index ETFs returned 27.5% through the end of November. Conversely, hedge funds’ top 20 large-cap stock picks generated a return of 37.4% during the same period. An average long/short hedge fund returned only a fraction of this due to the hedges they implement and the large fees they charge. Our research covering the last 18 years indicates that investors can outperform the market by imitating hedge funds’ consensus stock picks rather than directly investing in hedge funds. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like HTG Molecular Diagnostics, Inc. (NASDAQ:HTGM).
HTG Molecular Diagnostics, Inc. (NASDAQ:HTGM) shareholders have witnessed an increase in enthusiasm from smart money of late. Our calculations also showed that HTGM 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.
According to most stock holders, hedge funds are viewed as unimportant, outdated investment vehicles of years past. While there are greater than 8000 funds trading at present, Our experts look at the upper echelon of this club, about 750 funds. Most estimates calculate that this group of people preside over the lion’s share of the hedge fund industry’s total asset base, and by observing their best picks, Insider Monkey has uncovered a few investment strategies that have historically outrun the S&P 500 index. Insider Monkey’s flagship short hedge fund strategy outstripped the S&P 500 short ETFs by around 20 percentage points a year since its inception in May 2014. Our portfolio of short stocks lost 27.8% since February 2017 (through November 21st) even though the market was up more than 39% during the same period. We just shared a list of 7 short targets in our latest quarterly update .
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. We’re going to take a gander at the latest hedge fund action surrounding HTG Molecular Diagnostics, Inc. (NASDAQ:HTGM).
What have hedge funds been doing with HTG Molecular Diagnostics, Inc. (NASDAQ:HTGM)?
At Q3’s end, a total of 10 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 67% from the previous quarter. The graph below displays the number of hedge funds with bullish position in HTGM over the last 17 quarters. With the smart money’s capital changing hands, there exists a few key hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).
Among these funds, Nantahala Capital Management held the most valuable stake in HTG Molecular Diagnostics, Inc. (NASDAQ:HTGM), which was worth $3.3 million at the end of the third quarter. On the second spot was Alyeska Investment Group which amassed $0.9 million worth of shares. Sio Capital, Diametric Capital, and Springbok Capital 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 Diametric Capital allocated the biggest weight to HTG Molecular Diagnostics, Inc. (NASDAQ:HTGM), around 0.15% of its 13F portfolio. Nantahala Capital Management is also relatively very bullish on the stock, earmarking 0.12 percent of its 13F equity portfolio to HTGM.
As one would reasonably expect, key money managers have been driving this bullishness. Nantahala Capital Management, managed by Wilmot B. Harkey and Daniel Mack, assembled the most outsized position in HTG Molecular Diagnostics, Inc. (NASDAQ:HTGM). Nantahala Capital Management had $3.3 million invested in the company at the end of the quarter. Michael Castor’s Sio Capital also made a $0.2 million investment in the stock during the quarter. The other funds with new positions in the stock are Renaissance Technologies, Bradley Louis Radoff’s Fondren Management, and Ken Fisher’s Fisher Asset Management.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as HTG Molecular Diagnostics, Inc. (NASDAQ:HTGM) but similarly valued. These stocks are Nova Lifestyle, Inc (NASDAQ:NVFY), VivoPower International PLC (NASDAQ:VVPR), Co-Diagnostics, Inc. (NASDAQ:CODX), and Paramount Gold and Silver Corp. (NYSE:PZG). This group of stocks’ market valuations are closest to HTGM’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| NVFY | 1 | 20 | 0 |
| VVPR | 1 | 22 | -1 |
| CODX | 1 | 21 | 0 |
| PZG | 2 | 83 | 1 |
| Average | 1.25 | 37 | 0 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 1.25 hedge funds with bullish positions and the average amount invested in these stocks was $0 million. That figure was $5 million in HTGM’s case. Paramount Gold and Silver Corp. (NYSE:PZG) is the most popular stock in this table. On the other hand Nova Lifestyle, Inc (NASDAQ:NVFY) is the least popular one with only 1 bullish hedge fund positions. Compared to these stocks HTG Molecular Diagnostics, Inc. (NASDAQ:HTGM) is more popular among hedge funds. 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 HTGM wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on HTGM were disappointed as the stock returned -0.8% 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.
