Is HealthStream, Inc. (NASDAQ:HSTM) a good place to invest some of your money right now? We can gain invaluable insight to help us answer that question by studying the investment trends of top investors, who employ world-class Ivy League graduates, who are given immense resources and industry contacts to put their financial expertise to work. The top picks of these firms have historically outperformed the market when we account for known risk factors, making them very valuable investment ideas.
HealthStream, Inc. (NASDAQ:HSTM) was in 11 hedge funds’ portfolios at the end of the third quarter of 2019. HSTM has seen a decrease in activity from the world’s largest hedge funds lately. There were 13 hedge funds in our database with HSTM positions at the end of the previous quarter. Our calculations also showed that HSTM isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to 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 hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (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 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Paul Marshall of Marshall Wace
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds‘ buy/sell signals. We’re going to analyze the key hedge fund action encompassing HealthStream, Inc. (NASDAQ:HSTM).
Hedge fund activity in HealthStream, Inc. (NASDAQ:HSTM)
At the end of the third quarter, a total of 11 of the hedge funds tracked by Insider Monkey were long this stock, a change of -15% from the previous quarter. On the other hand, there were a total of 11 hedge funds with a bullish position in HSTM a year ago. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were upping their stakes considerably (or already accumulated large positions).
The largest stake in HealthStream, Inc. (NASDAQ:HSTM) was held by Renaissance Technologies, which reported holding $15.7 million worth of stock at the end of September. It was followed by D E Shaw with a $6.7 million position. Other investors bullish on the company included AQR Capital Management, Millennium Management, and Marshall Wace. In terms of the portfolio weights assigned to each position Weld Capital Management allocated the biggest weight to HealthStream, Inc. (NASDAQ:HSTM), around 0.06% of its 13F portfolio. Marshall Wace is also relatively very bullish on the stock, designating 0.02 percent of its 13F equity portfolio to HSTM.
Because HealthStream, Inc. (NASDAQ:HSTM) has experienced a decline in interest from the entirety of the hedge funds we track, it’s safe to say that there is a sect of hedge funds who were dropping their entire stakes heading into Q4. It’s worth mentioning that Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital sold off the biggest position of all the hedgies followed by Insider Monkey, worth an estimated $6.1 million in stock, and Robert B. Gillam’s McKinley Capital Management was right behind this move, as the fund dumped about $3.1 million worth. These bearish behaviors are interesting, as total hedge fund interest dropped by 2 funds heading into Q4.
Let’s now take a look at hedge fund activity in other stocks similar to HealthStream, Inc. (NASDAQ:HSTM). We will take a look at Odonate Therapeutics, Inc. (NASDAQ:ODT), Triumph Bancorp Inc (NASDAQ:TBK), Golden Ocean Group Limited (NASDAQ:GOGL), and Stock Yards Bancorp, Inc. (NASDAQ:SYBT). This group of stocks’ market caps match HSTM’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ODT | 14 | 447024 | 1 |
| TBK | 6 | 29347 | -1 |
| GOGL | 7 | 205416 | 0 |
| SYBT | 10 | 15559 | 4 |
| Average | 9.25 | 174337 | 1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 9.25 hedge funds with bullish positions and the average amount invested in these stocks was $174 million. That figure was $42 million in HSTM’s case. Odonate Therapeutics, Inc. (NASDAQ:ODT) is the most popular stock in this table. On the other hand Triumph Bancorp Inc (NASDAQ:TBK) is the least popular one with only 6 bullish hedge fund positions. HealthStream, Inc. (NASDAQ:HSTM) 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 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Hedge funds were also right about betting on HSTM as the stock returned 12.5% during the fourth quarter (through the end of November) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.
