We can judge whether Aqua Metals, Inc. (NASDAQ:AQMS) is a good investment right now by following the lead of some of the best investors in the world and piggybacking their ideas. There’s no better way to get these firms’ immense resources and analytical capabilities working for us than to follow their lead into their best ideas. While not all of these picks will be winners, our research shows that these picks historically outperformed the market when we factor in known risk factors.
Hedge fund interest in Aqua Metals, Inc. (NASDAQ:AQMS) shares was flat at the end of last quarter. This is usually a negative indicator. 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 Fortress Biotech Inc (NASDAQ:FBIO), Cortland Bancorp (NASDAQ:CLDB), and TransGlobe Energy Corporation (NASDAQ:TGA) to gather more data points. Our calculations also showed that AQMS 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.
Israel Englander of Millennium Management
We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. 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 even check out this option genius’ weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock already gained 20 percent. With all of this in mind let’s check out the recent hedge fund action encompassing Aqua Metals, Inc. (NASDAQ:AQMS).
What does smart money think about Aqua Metals, Inc. (NASDAQ:AQMS)?
At Q3’s end, a total of 5 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from one quarter earlier. On the other hand, there were a total of 8 hedge funds with a bullish position in AQMS a year ago. With the smart money’s sentiment swirling, there exists an “upper tier” of key hedge fund managers who were increasing their holdings meaningfully (or already accumulated large positions).
The largest stake in Aqua Metals, Inc. (NASDAQ:AQMS) was held by Selz Capital, which reported holding $0.5 million worth of stock at the end of September. It was followed by Citadel Investment Group with a $0.1 million position. Other investors bullish on the company included Levin Capital Strategies, D E Shaw, and Millennium Management. In terms of the portfolio weights assigned to each position Selz Capital allocated the biggest weight to Aqua Metals, Inc. (NASDAQ:AQMS), around 0.12% of its 13F portfolio. Levin Capital Strategies is also relatively very bullish on the stock, setting aside 0.01 percent of its 13F equity portfolio to AQMS.
Earlier we told you that the aggregate hedge fund interest in the stock was unchanged and we view this as a negative development. Even though there weren’t any hedge funds dumping their holdings during the third quarter, there weren’t any hedge funds initiating brand new positions. This indicates that hedge funds, at the very best, perceive this stock as dead money and they haven’t identified any viable catalysts that can attract investor attention.
Let’s now take a look at hedge fund activity in other stocks similar to Aqua Metals, Inc. (NASDAQ:AQMS). These stocks are Fortress Biotech Inc (NASDAQ:FBIO), Cortland Bancorp (NASDAQ:CLDB), TransGlobe Energy Corporation (NASDAQ:TGA), and Contango Oil & Gas Company (NYSE:MCF). All of these stocks’ market caps are similar to AQMS’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| FBIO | 8 | 4865 | 1 |
| CLDB | 3 | 13737 | 0 |
| TGA | 3 | 6551 | -1 |
| MCF | 3 | 1003 | -2 |
| Average | 4.25 | 6539 | -0.5 |
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 $7 million. That figure was $1 million in AQMS’s case. Fortress Biotech Inc (NASDAQ:FBIO) is the most popular stock in this table. On the other hand Cortland Bancorp (NASDAQ:CLDB) is the least popular one with only 3 bullish hedge fund positions. Aqua Metals, Inc. (NASDAQ:AQMS) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but 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 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately AQMS wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on AQMS were disappointed as the stock returned -20.6% during the fourth quarter (through the end of November) 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 this year.
Disclosure: None. This article was originally published at Insider Monkey.
