We are still in an overall bull market and many stocks that smart money investors were piling into surged through October 17th. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 45% and 39% respectively. Hedge funds’ top 3 stock picks returned 34.4% this year and beat the S&P 500 ETFs by 13 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like Heska Corp (NASDAQ:HSKA).
Heska Corp (NASDAQ:HSKA) shareholders have witnessed an increase in hedge fund interest in recent months. Our calculations also showed that HSKA isn’t among the 30 most popular stocks among hedge funds (see the video below).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. 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.
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let’s take a look at the new hedge fund action regarding Heska Corp (NASDAQ:HSKA).
What does smart money think about Heska Corp (NASDAQ:HSKA)?
Heading into the third quarter of 2019, a total of 13 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 18% from one quarter earlier. By comparison, 9 hedge funds held shares or bullish call options in HSKA a year ago. With hedgies’ positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were adding to their holdings considerably (or already accumulated large positions).
More specifically, Millennium Management was the largest shareholder of Heska Corp (NASDAQ:HSKA), with a stake worth $17.7 million reported as of the end of March. Trailing Millennium Management was Adage Capital Management, which amassed a stake valued at $3.8 million. Nine Ten Partners, Eversept Partners, and GAMCO Investors were also very fond of the stock, giving the stock large weights in their portfolios.
Now, key money managers have jumped into Heska Corp (NASDAQ:HSKA) headfirst. Adage Capital Management, managed by Phill Gross and Robert Atchinson, initiated the most outsized position in Heska Corp (NASDAQ:HSKA). Adage Capital Management had $3.8 million invested in the company at the end of the quarter. Brian Bares, Russell Mollen, and James Bradshaw’s Nine Ten Partners also initiated a $3.7 million position during the quarter. The other funds with new positions in the stock are Peter Muller’s PDT Partners and Renaissance Technologies.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Heska Corp (NASDAQ:HSKA) but similarly valued. We will take a look at W&T Offshore, Inc. (NYSE:WTI), DBV Technologies SA (NASDAQ:DBVT), Hanger, Inc. (NYSE:HNGR), and United Insurance Holdings Corp. (NASDAQ:UIHC). All of these stocks’ market caps resemble HSKA’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| WTI | 22 | 69485 | -2 |
| DBVT | 10 | 108636 | 2 |
| HNGR | 17 | 122497 | -5 |
| UIHC | 8 | 7316 | 1 |
| Average | 14.25 | 76984 | -1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 14.25 hedge funds with bullish positions and the average amount invested in these stocks was $77 million. That figure was $36 million in HSKA’s case. W&T Offshore, Inc. (NYSE:WTI) is the most popular stock in this table. On the other hand United Insurance Holdings Corp. (NASDAQ:UIHC) is the least popular one with only 8 bullish hedge fund positions. Heska Corp (NASDAQ:HSKA) 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. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately HSKA wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); HSKA investors were disappointed as the stock returned -16.8% during the third quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far in 2019.
Disclosure: None. This article was originally published at Insider Monkey.
