Billionaire hedge fund managers such as Steve Cohen and Stan Druckenmiller can generate millions or even billions of dollars every year by pinning down high-potential small-cap stocks and pouring cash into these candidates. Small-cap stocks are overlooked by most investors, brokerage houses, and financial services hubs, while the unlimited research abilities of the big players within the hedge fund industry can easily identify the undervalued and high-potential stocks that reside the ignored corners of equity markets. There are numerous small-cap stocks that have turned out to be great winners, which is one of the main reasons the Insider Monkey team pays close attention to the hedge fund activity in relation to these stocks.
Is 3D Systems Corporation (NYSE:DDD) a healthy stock for your portfolio? The best stock pickers are categorically turning bullish. The number of long hedge fund bets increased by 1 lately. There were 12 hedge funds in our database with DDD holdings at the end of the third quarter. 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 Agios Pharmaceuticals Inc (NASDAQ:AGIO), Ericsson (ADR) (NASDAQ:ERIC), and Kemper Corporation (NYSE:KMPR) to gather more data points.
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We care about hedge fund sentiment because historically hedge funds’ stock picks delivered strong risk adjusted returns. There are certain segments of the market where hedge funds’ stock picks performed much better than its benchmarks. For instance, the 30 most popular mid-cap stocks among the best performing hedge funds returned 18% over the last 12 months outpacing S&P 500 Index by more than 10 percentage points. We developed this strategy 2.5 years ago and started sharing its picks in our quarterly newsletter. It bested the S&P 500 Index ETFs by delivering a solid 39% vs. 22% gain for its benchmarks.
Now, let’s take a glance at the fresh action surrounding 3D Systems Corporation (NYSE:DDD).
What have hedge funds been doing with 3D Systems Corporation (NYSE:DDD)?
Heading into the fourth quarter of 2016, a total of 12 of the hedge funds tracked by Insider Monkey held long positions in this stock, up 9% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards DDD over the last 5 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Of the funds tracked by Insider Monkey, Renaissance Technologies, one of the largest hedge funds in the world, has the largest position in 3D Systems Corporation (NYSE:DDD), worth close to $21.4 million, corresponding to less than 0.1% of its total 13F portfolio. The second most bullish fund manager is Citadel Investment Group, led by Ken Griffin, holding a $9.1 million call position; less than 0.1% of its 13F portfolio is allocated to the stock. Some other professional money managers that are bullish comprise Peter Muller’s PDT Partners, Daniel S. Och’s OZ Management and D. E. Shaw’s D E Shaw. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.
As industrywide interest jumped, a couple of money managers were breaking ground themselves. Joel Greenblatt’s Gotham Asset Management initiated a $0.5 million position during the quarter. The only other fund with a new position in the stock is Cliff Asness’ AQR Capital Management, having amassed a position worth $237,000 at the end of the quarter.
Let’s now review hedge fund activity in other stocks similar to 3D Systems Corporation (NYSE:DDD). We will take a look at Agios Pharmaceuticals Inc (NASDAQ:AGIO), Ericsson (ADR) (NASDAQ:ERIC), Kemper Corporation (NYSE:KMPR), and GCP Applied Technologies Inc(NYSE:GCP). All of these stocks’ market caps are closest to DDD’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| AGIO | 19 | 219286 | 8 |
| ERIC | 11 | 132171 | -1 |
| KMPR | 5 | 3831 | -1 |
| GCP | 24 | 672958 | -6 |
As you can see these stocks had an average of 15 hedge funds with bullish positions and the average amount invested in these stocks was $257 million. That figure was $61 million in DDD’s case. GCP Applied Technologies Inc(NYSE:GCP) is the most popular stock in this table. On the other hand Kemper Corporation (NYSE:KMPR) is the least popular one with only 5 bullish hedge fund positions. 3D Systems Corporation (NYSE:DDD) 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 GCP might be a better candidate to consider taking a long position in.
Disclosure: none.
