Here is What Hedge Funds Think About AdCare Health Systems, Inc. (ADK)

Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that’s why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to smartest analysts and expensive data/information sources that individual investors can’t match. So should one consider investing in AdCare Health Systems, Inc. (NYSEMKT:ADK)? The smart money sentiment can provide an answer to this question.

Is AdCare Health Systems, Inc. a good investment right now? The best stock pickers are taking an optimistic view. The number of long hedge fund positions advanced by 1 lately. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as GULF COAST ULTRA DEEP RTY TR (OTCMKTS:GULTU), Ballantyne Strong Inc (NYSEMKT:BTN), and OncoGenex Pharmaceuticals Inc (NASDAQ:OGXI) to gather more data points.

In the eyes of most stock holders, hedge funds are viewed as worthless, old financial tools of years past. While there are greater than 8000 funds in operation today, We look at the elite of this club, around 700 funds. Most estimates calculate that this group of people control the lion’s share of all hedge funds’ total asset base, and by keeping track of their unrivaled picks, Insider Monkey has figured out several investment strategies that have historically beaten Mr. Market. Insider Monkey’s small-cap hedge fund strategy beat the S&P 500 index by 12 percentage points per annum for a decade in their back tests.

With all of this in mind, let’s take a look at the latest action regarding AdCare Health Systems, Inc. (NYSEMKT:ADK).

How are hedge funds trading AdCare Health Systems, Inc. (NYSEMKT:ADK)?

At the Q3’s end, a total of 5 of the hedge funds tracked by Insider Monkey were long this stock, a change of 25% from the second quarter. With the smart money’s positions undergoing their usual ebb and flow, there exists an “upper tier” of noteworthy hedge fund managers who were increasing their holdings meaningfully (or already accumulated large positions).

Of the funds tracked by Insider Monkey, Paul Orlin and Alex Porter’s Amici Capital has the most valuable position in AdCare Health Systems, Inc. (NYSEMKT:ADK), worth close to $1.8 million, accounting for 0.1% of its total 13F portfolio. Sitting at the No. 2 spot is Jim Simons’ Renaissance Technologies, with a $0.8 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Some other peers that hold long positions consist of Bruce Silver’s Silver Capital Management LLC and Adam Wright and Gary Kohler’s Blue Clay Capital.

As industrywide interest jumped, some big names have been driving this bullishness. GAMCO Investors, managed by Mario Gabelli, assembled the largest position in AdCare Health Systems, Inc. (NYSEMKT:ADK). GAMCO Investors had $0.4 million invested in the company at the end of the quarter.

Let’s now take a look at hedge fund activity in other stocks similar to AdCare Health Systems, Inc. (NYSEMKT:ADK). We will take a look at GULF COAST ULTRA DEEP RTY TR (OTCMKTS:GULTU), Ballantyne Strong Inc (NYSEMKT:BTN), OncoGenex Pharmaceuticals Inc (NASDAQ:OGXI), and Verastem Inc (NASDAQ:VSTM). This group of stocks’ market values are similar to ADK’s market value.

As you can see these stocks had an average of 7 hedge funds with bullish positions and the average amount invested in these stocks was $11 million, compared to $4 million in ADK’s case. GULF COAST ULTRA DEEP RTY TR (OTCMKTS:GULTU) is the most popular stock in this table, while Ballantyne Strong Inc (NYSEMKT:BTN) is the least popular one with only 4 bullish hedge fund positions. AdCare Health Systems, Inc. (NYSEMKT:ADK) is not the least popular stock in this group, but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard GULTU might be a better candidate to consider a long position.