Reputable billionaire investors such as Jim Simons, Cliff Asness and David Tepper generate exorbitant profits for their wealthy accredited investors (a minimum of $1 million in investable assets would be required to invest in a hedge fund and most successful hedge funds won’t accept your savings unless you commit at least $5 million) by pinpointing winning small-cap stocks. There is little or no publicly-available information at all on some of these small companies, which makes it hard for an individual investor to pin down a winner within the small-cap space. However, hedge funds and other big asset managers can do the due diligence and analysis for you instead, thanks to their highly-skilled research teams and vast resources to conduct an appropriate evaluation process. Looking for potential winners within the small-cap galaxy of stocks? We believe following the smart money is a good starting point.
The Joint Corp. (NASDAQ:JYNT) was in 9 hedge funds’ portfolios at the end of the first quarter of 2019. JYNT has seen an increase in enthusiasm from smart money recently. There were 6 hedge funds in our database with JYNT holdings at the end of the previous quarter. Our calculations also showed that jynt isn’t among the 30 most popular stocks among hedge funds.
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 market by 40 percentage points since May 2014 through May 30, 2019 (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 our short portfolio.
Let’s check out the fresh hedge fund action surrounding The Joint Corp. (NASDAQ:JYNT).
What does smart money think about The Joint Corp. (NASDAQ:JYNT)?
At Q1’s end, a total of 9 of the hedge funds tracked by Insider Monkey were long this stock, a change of 50% from the fourth quarter of 2018. Below, you can check out the change in hedge fund sentiment towards JYNT over the last 15 quarters. With the smart money’s capital changing hands, there exists a select group of key hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).
Among these funds, Bandera Partners held the most valuable stake in The Joint Corp. (NASDAQ:JYNT), which was worth $20.5 million at the end of the first quarter. On the second spot was Nantahala Capital Management which amassed $17.9 million worth of shares. Moreover, Skylands Capital, Renaissance Technologies, and Millennium Management were also bullish on The Joint Corp. (NASDAQ:JYNT), allocating a large percentage of their portfolios to this stock.
Now, key hedge funds have been driving this bullishness. Millennium Management, managed by Israel Englander, established the biggest position in The Joint Corp. (NASDAQ:JYNT). Millennium Management had $1.4 million invested in the company at the end of the quarter. Jordan Moelis and Jeff Farroni’s Deep Field Asset Management also initiated a $0.7 million position during the quarter. The following funds were also among the new JYNT investors: Michael Gelband’s ExodusPoint Capital and Mike Vranos’s Ellington.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as The Joint Corp. (NASDAQ:JYNT) but similarly valued. These stocks are Stratus Properties Inc. (NASDAQ:STRS), First Bank (NASDAQ:FRBA), Capital Product Partners L.P. (NASDAQ:CPLP), and Halcon Resources Corp (NYSE:HK). All of these stocks’ market caps resemble JYNT’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| STRS | 3 | 32568 | -1 |
| FRBA | 3 | 5888 | -1 |
| CPLP | 6 | 4317 | 1 |
| HK | 14 | 68659 | -8 |
| Average | 6.5 | 27858 | -2.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 6.5 hedge funds with bullish positions and the average amount invested in these stocks was $28 million. That figure was $51 million in JYNT’s case. Halcon Resources Corp (NYSE:HK) is the most popular stock in this table. On the other hand Stratus Properties Inc. (NASDAQ:STRS) is the least popular one with only 3 bullish hedge fund positions. The Joint Corp. (NASDAQ:JYNT) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. Hedge funds were also right about betting on JYNT as the stock returned 7.4% during the same period and outperformed the market by an even larger margin. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.
