How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding Stereotaxis Inc (NYSE:STXS) and determine whether hedge funds had an edge regarding this stock.
Stereotaxis Inc (NYSE:STXS) was in 13 hedge funds’ portfolios at the end of the first quarter of 2020. STXS has seen an increase in hedge fund interest lately. There were 11 hedge funds in our database with STXS positions at the end of the previous quarter. Our calculations also showed that STXS 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.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Paul Isaac of Arbiter Partners Capital Management
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, we take a look at lists like the 12 largest cement producing countries to identify emerging trends that are likely to lead to 1000% gains in the coming years. 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. Keeping this in mind let’s go over the latest hedge fund action encompassing Stereotaxis Inc (NYSE:STXS).
Hedge fund activity in Stereotaxis Inc (NYSE:STXS)
At Q1’s end, a total of 13 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 18% from the fourth quarter of 2019. By comparison, 1 hedge funds held shares or bullish call options in STXS a year ago. With hedgies’ capital changing hands, there exists an “upper tier” of notable hedge fund managers who were increasing their holdings meaningfully (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, DAFNA Capital Management, managed by Nathan Fischel, holds the largest position in Stereotaxis Inc (NYSE:STXS). DAFNA Capital Management has a $41.3 million position in the stock, comprising 17.2% of its 13F portfolio. Sitting at the No. 2 spot is Arbiter Partners Capital Management, managed by Paul J. Isaac, which holds a $14.1 million position; 2.1% of its 13F portfolio is allocated to the stock. Some other peers with similar optimism consist of James A. Silverman’s Opaleye Management, Jeremy Green’s Redmile Group and Efrem Kamen’s Pura Vida Investments. In terms of the portfolio weights assigned to each position DAFNA Capital Management allocated the biggest weight to Stereotaxis Inc (NYSE:STXS), around 17.24% of its 13F portfolio. Opaleye Management is also relatively very bullish on the stock, designating 3.09 percent of its 13F equity portfolio to STXS.
Consequently, key hedge funds were breaking ground themselves. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, assembled the most outsized position in Stereotaxis Inc (NYSE:STXS). Arrowstreet Capital had $0.3 million invested in the company at the end of the quarter. John Overdeck and David Siegel’s Two Sigma Advisors also made a $0.3 million investment in the stock during the quarter. The only other fund with a brand new STXS position is Peter Algert and Kevin Coldiron’s Algert Coldiron Investors.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Stereotaxis Inc (NYSE:STXS) but similarly valued. We will take a look at Selecta Biosciences, Inc. (NASDAQ:SELB), Gravity Co., LTD. (NASDAQ:GRVY), Sierra Wireless, Inc. (NASDAQ:SWIR), and Old Second Bancorp Inc. (NASDAQ:OSBC). All of these stocks’ market caps are closest to STXS’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SELB | 21 | 94687 | 8 |
| GRVY | 4 | 2026 | -1 |
| SWIR | 9 | 52739 | -3 |
| OSBC | 11 | 16347 | 0 |
| Average | 11.25 | 41450 | 1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 11.25 hedge funds with bullish positions and the average amount invested in these stocks was $41 million. That figure was $85 million in STXS’s case. Selecta Biosciences, Inc. (NASDAQ:SELB) is the most popular stock in this table. On the other hand Gravity Co., LTD. (NASDAQ:GRVY) is the least popular one with only 4 bullish hedge fund positions. Stereotaxis Inc (NYSE:STXS) 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 STXS as the stock returned 69.5% in Q2 (through June 25th) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Follow Stereotaxis Inc. (NASDAQ:STXS)
Follow Stereotaxis Inc. (NASDAQ:STXS)
Disclosure: None. This article was originally published at Insider Monkey.
