We are still in an overall bull market and many stocks that smart money investors were piling into surged through November 22nd. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 52% and 49% respectively. Hedge funds’ top 3 stock picks returned 39.1% this year and beat the S&P 500 ETFs by nearly 13 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. 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 IEC Electronics Corp. (NYSE:IEC).
IEC Electronics Corp. (NYSE:IEC) investors should pay attention to an increase in hedge fund sentiment in recent months. IEC was in 3 hedge funds’ portfolios at the end of the third quarter of 2019. There were 2 hedge funds in our database with IEC holdings at the end of the previous quarter. Our calculations also showed that IEC isn’t among the 30 most popular stocks among hedge funds.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. 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 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 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.
Jim Simons of Renaissance Technologies
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 peek at the recent hedge fund action regarding IEC Electronics Corp. (NYSE:IEC).
What have hedge funds been doing with IEC Electronics Corp. (NYSE:IEC)?
At the end of the third quarter, a total of 3 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 50% from the previous quarter. By comparison, 1 hedge funds held shares or bullish call options in IEC a year ago. With the smart money’s capital changing hands, there exists a select group of noteworthy hedge fund managers who were adding to their holdings substantially (or already accumulated large positions).
The largest stake in IEC Electronics Corp. (NYSE:IEC) was held by Solas Capital Management, which reported holding $4.1 million worth of stock at the end of September. It was followed by Renaissance Technologies with a $2.1 million position. The only other hedge fund that is bullish on the company was Arrowstreet Capital.
There weren’t any hedge funds initiating brand new positions in the stock during the third quarter.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as IEC Electronics Corp. (NYSE:IEC) but similarly valued. We will take a look at Strata Skin Sciences, Inc. (NASDAQ:SSKN), Ampio Pharmaceuticals, Inc. (NYSE:AMPE), CARBO Ceramics Inc. (NYSE:CRR), and Dynagas LNG Partners LP (NYSE:DLNG). This group of stocks’ market caps match IEC’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SSKN | 4 | 15524 | 1 |
| AMPE | 4 | 210 | -1 |
| CRR | 6 | 9284 | -2 |
| DLNG | 1 | 48 | -2 |
| Average | 3.75 | 6267 | -1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 3.75 hedge funds with bullish positions and the average amount invested in these stocks was $6 million. That figure was $6 million in IEC’s case. CARBO Ceramics Inc. (NYSE:CRR) is the most popular stock in this table. On the other hand Dynagas LNG Partners LP (NYSE:DLNG) is the least popular one with only 1 bullish hedge fund positions. IEC Electronics Corp. (NYSE:IEC) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 20 most popular stocks among hedge funds returned 34.7% in 2019 through November 22nd and outperformed the S&P 500 ETF (SPY) by 8.5 percentage points. A small number of hedge funds were also right about betting on IEC as the stock returned 12.9% during Q4 (through 11/22) and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.