With the first-quarter round of 13F filings behind us it is time to take a look at the stocks in which some of the best money managers in the world preferred to invest or sell heading into the second quarter. One of these stocks was Adamas Pharmaceuticals Inc (NASDAQ:ADMS).
Is Adamas Pharmaceuticals Inc (NASDAQ:ADMS) a buy, sell, or hold? Investors who are in the know are becoming more confident. The number of long hedge fund bets moved up by 1 in recent months. Our calculations also showed that ADMS isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). ADMS was in 10 hedge funds’ portfolios at the end of September. There were 9 hedge funds in our database with ADMS holdings at the end of the previous quarter.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 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 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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
Ken Fisher of Fisher Asset Management
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 latest hedge fund action regarding Adamas Pharmaceuticals Inc (NASDAQ:ADMS).
How have hedgies been trading Adamas Pharmaceuticals Inc (NASDAQ:ADMS)?
At the end of the third quarter, a total of 10 of the hedge funds tracked by Insider Monkey were long this stock, a change of 11% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards ADMS over the last 17 quarters. With hedge funds’ sentiment swirling, there exists a select group of notable hedge fund managers who were increasing their holdings significantly (or already accumulated large positions).
More specifically, Armistice Capital was the largest shareholder of Adamas Pharmaceuticals Inc (NASDAQ:ADMS), with a stake worth $2.7 million reported as of the end of September. Trailing Armistice Capital was Kerrisdale Capital, which amassed a stake valued at $1.2 million. Healthcare Value Capital, Baker Bros. Advisors, and Fisher Asset Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Healthcare Value Capital allocated the biggest weight to Adamas Pharmaceuticals Inc (NASDAQ:ADMS), around 1.85% of its 13F portfolio. Kerrisdale Capital is also relatively very bullish on the stock, earmarking 0.74 percent of its 13F equity portfolio to ADMS.
Consequently, some big names have been driving this bullishness. Renaissance Technologies, founded by Jim Simons, initiated the largest position in Adamas Pharmaceuticals Inc (NASDAQ:ADMS). Renaissance Technologies had $0.6 million invested in the company at the end of the quarter. David E. Shaw’s D E Shaw also initiated a $0.4 million position during the quarter. The other funds with brand new ADMS positions are Minhua Zhang’s Weld Capital Management and Ken Griffin’s Citadel Investment Group.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Adamas Pharmaceuticals Inc (NASDAQ:ADMS) but similarly valued. We will take a look at Union Bankshares, Inc. (NASDAQ:UNB), Avalon GloboCare Corp. (NASDAQ:AVCO), Twin Disc, Incorporated (NASDAQ:TWIN), and Harrow Health, Inc. (NASDAQ:HROW). This group of stocks’ market caps resemble ADMS’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| UNB | 1 | 663 | 0 |
| AVCO | 2 | 444 | 0 |
| TWIN | 5 | 18448 | 0 |
| HROW | 9 | 27272 | 0 |
| Average | 4.25 | 11707 | 0 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 4.25 hedge funds with bullish positions and the average amount invested in these stocks was $12 million. That figure was $8 million in ADMS’s case. Harrow Health, Inc. (NASDAQ:HROW) is the most popular stock in this table. On the other hand Union Bankshares, Inc. (NASDAQ:UNB) is the least popular one with only 1 bullish hedge fund positions. Compared to these stocks Adamas Pharmaceuticals Inc (NASDAQ:ADMS) is more popular among hedge funds. 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 ADMS as the stock returned 16.3% during the first two months of Q4 and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
Disclosure: None. This article was originally published at Insider Monkey.
