In this article we will take a look at whether hedge funds think Medigus Ltd. (NASDAQ:MDGS) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.
Is Medigus Ltd. (NASDAQ:MDGS) the right investment to pursue these days? Investors who are in the know are reducing their bets on the stock. The number of bullish hedge fund positions fell by 1 recently. Our calculations also showed that MDGS 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). MDGS was in 3 hedge funds’ portfolios at the end of March. There were 4 hedge funds in our database with MDGS holdings at the end of the previous quarter.
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 44 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.
Jim Simons Founder of Renaissance Technologies
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, legendary investor Bill Miller told investors to sell 7 extremely popular recession stocks last month. So, we went through his list and recommended another stock with 100% upside potential instead. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now we’re going to view the recent hedge fund action surrounding Medigus Ltd. (NASDAQ:MDGS).
What have hedge funds been doing with Medigus Ltd. (NASDAQ:MDGS)?
Heading into the second quarter of 2020, a total of 3 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -25% from the fourth quarter of 2019. The graph below displays the number of hedge funds with bullish position in MDGS over the last 18 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Medigus Ltd. (NASDAQ:MDGS) was held by Armistice Capital, which reported holding $0.2 million worth of stock at the end of September. It was followed by Renaissance Technologies with a $0 million position. The only other hedge fund that is bullish on the company was Sabby Capital.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: OrbiMed Advisors. One hedge fund selling its entire position doesn’t always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don’t think this is the case in this case because none of the 750+ hedge funds tracked by Insider Monkey identified MDGS as a viable investment and initiated a position in the stock.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Medigus Ltd. (NASDAQ:MDGS) but similarly valued. We will take a look at Atlas Financial Holdings Inc (NASDAQ:AFH), SenesTech, Inc. (NASDAQ:SNES), Ideal Power Inc. (NASDAQ:IPWR), and Tenax Therapeutics Inc (NASDAQ:TENX). This group of stocks’ market valuations are closest to MDGS’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| AFH | 2 | 340 | -1 |
| SNES | 1 | 139 | -1 |
| IPWR | 1 | 78 | 0 |
| TENX | 3 | 455 | 1 |
| Average | 1.75 | 253 | -0.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 1.75 hedge funds with bullish positions and the average amount invested in these stocks was $0 million. That figure was $0 million in MDGS’s case. Tenax Therapeutics Inc (NASDAQ:TENX) is the most popular stock in this table. On the other hand SenesTech, Inc. (NASDAQ:SNES) is the least popular one with only 1 bullish hedge fund positions. Medigus Ltd. (NASDAQ:MDGS) 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 7.9% in 2020 through May 22nd but still beat the market by 15.6 percentage points. Hedge funds were also right about betting on MDGS as the stock returned 205.7% in Q2 (through May 22nd) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.
