Hedge Funds See More Upside for Nevro Corp (NVRO) and WidePoint Corporation (WYY)

According to a recent 13G form filed with the Securities and Exchange Commission Kevin Kotler‘s (pictured) Broadfin Capital has added 1.18 million shares to its stake in Nevro Corp (NYSE:NVRO) taking the total amount to about 1.61 million shares, which amass about 5.76% of the company’s outstanding stock. In a separate Form 4 filing, Brett Hendrickson‘s Nokomis Capital disclosed surging its WidePoint Corporation (NYSEMKT:WYY) stake by over 4 million shares to 12.77 million shares held indirectly by the fund and representing about 17% of WidePoint’s outstanding shares.

In the eyes of most traders, hedge funds are assumed to be underperforming, old investment tools of the past. While there are more than 8,000 funds in operation at present, hedge fund experts at Insider Monkey look at the aristocrats of this group, around 700 funds. Contrary to popular belief Insider Monkey’s research revealed that hedge funds underperformed in recent years because of their short positions as well as the huge fees that they charge. Hedge funds managed to outperform the market on the long side of their portfolio. In fact, the 15 most popular small-cap stocks among hedge funds returned 118% since the end of August 2012 and beat the S&P 500 Index by 60 percentage points (see more details here). This is a huge margin which is why hedge funds’ recent purchases are a strong indicator.

Broadfin initiated a stake in Nevro Corp (NYSE:NVRO) during the second quarter with some 419,600 shares. Although the stock has traded nearly sideways since June, it is up by more than 31% so far this year. The $1.34 billion medical device company is focused on the treatment of neurological disorders and chronic pain. In its financial results for the second quarter Nevro reported a net loss per share of $0.77, which beat the estimates by $0.12 and revenue of $11.42 million was $1.72 million ahead of expectations. The company achieved a number of milestones during the quarter, including FDA approval for HF 10 Spinal Cord Simulation therapy, which is now being launched in the US. HF 10 therapy has benefited more than 4,000 chronic pain patients.

Among over 700 hedge funds that we track at Insider Monkey, the sentiment surrounding Nevro Corp (NYSE:NVRO) has been extremely bullish during the second quarter. The total number of funds holding the company in their portfolios increased to 19 at the end of June as compared to 13 a quarter earlier. The aggregate holdings during this period registered an increase to $225.98 million, representing 15.4% of the company’s market cap, from $88.09 million. Donald Chiboucis‘ Columbus Circle Investors increased its stake by 74% during the second trimester to 1.07 million shares valued at $57.26 million. On Columbus’ heels was Perceptive Advisors, managed by Joseph Edelman, which, after a 44% surge in its holding, disclosed ownership of 799,000 shares valued at $42.94 million. None of the company’s top ten stockholders within our database decreased their holdings during the quarter.

The stock of the $75.81 million provider of IT based products WidePoint Corporation (NYSEMKT:WYY)  has surged by more than 17% in the last five trading days, but it is still down by nearly 27% for the year. The recent price action hasn’t been on the back of any significant news apart from Nokomis raising its stake in WidePoint Corporation (NYSEMKT:WYY). The company missed both the top and bottom line expectations in its financial results for the second quarter. According to CFO Jim McCubbin this was mostly due to revenue recognition delays as well as a drag in customer acceptances and the launch of new products in partnership with Samsung. However, he sees strong growth for the company in the second half of the year from DHS component agencies and various partnerships including that with AT&T.

Generally speaking, smart money investors reduced their exposure to WidePoint Corporation (NYSEMKT:WYY) during the second quarter, as five funds held around $16.88 million worth of the company’s stock at the end of the quarter, down from seven firms with $15.32 million in total holdings at the end of March. The aggregate hedge fund holdings at the end of June amassed about 12.3% of WidePoint’s outstanding stock. Nokomis Capital headed our list of WidePoint’s investors even before the latest hike of its stake. It is followed by Jeffrey Moskowitz’s Harvey Partners which cut its stake by 25% to 750,000 shares valued at $1.25 million.

Disclosure: None