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 Coda Octopus Group, Inc. (NASDAQ:CODA).
Is Coda Octopus Group, Inc. (NASDAQ:CODA) a bargain? The best stock pickers are in a pessimistic mood. The number of bullish hedge fund positions went down by 1 recently. Our calculations also showed that CODA isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). CODA was in 4 hedge funds’ portfolios at the end of the third quarter of 2019. There were 5 hedge funds in our database with CODA positions at the end of the previous quarter.
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 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.
Paul Marshall of Marshall Wace
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. Now let’s take a peek at the latest hedge fund action surrounding Coda Octopus Group, Inc. (NASDAQ:CODA).
Hedge fund activity in Coda Octopus Group, Inc. (NASDAQ:CODA)
At the end of the third quarter, a total of 4 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -20% from the previous quarter. The graph below displays the number of hedge funds with bullish position in CODA over the last 17 quarters. With hedgies’ capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, holds the largest position in Coda Octopus Group, Inc. (NASDAQ:CODA). Arrowstreet Capital has a $0.9 million position in the stock, comprising less than 0.1%% of its 13F portfolio. Sitting at the No. 2 spot is Cliff Asness of AQR Capital Management, with a $0.8 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Remaining hedge funds and institutional investors with similar optimism comprise Gavin Saitowitz and Cisco J. del Valle’s Springbok Capital, Paul Marshall and Ian Wace’s Marshall Wace and . In terms of the portfolio weights assigned to each position Springbok Capital allocated the biggest weight to Coda Octopus Group, Inc. (NASDAQ:CODA), around 0.02% of its 13F portfolio. Marshall Wace is also relatively very bullish on the stock, dishing out 0.0028 percent of its 13F equity portfolio to CODA.
Seeing as Coda Octopus Group, Inc. (NASDAQ:CODA) has experienced declining sentiment from the smart money, we can see that there were a few fund managers that decided to sell off their entire stakes in the third quarter. Intriguingly, Renaissance Technologies sold off the biggest stake of the 750 funds monitored by Insider Monkey, worth about $1.4 million in stock, and Israel Englander’s Millennium Management was right behind this move, as the fund said goodbye to about $0.6 million worth. These transactions are interesting, as aggregate hedge fund interest fell by 1 funds in the third quarter.
Let’s also examine hedge fund activity in other stocks similar to Coda Octopus Group, Inc. (NASDAQ:CODA). We will take a look at Urban One, Inc. (NASDAQ:UONEK), Corvus Pharmaceuticals, Inc. (NASDAQ:CRVS), The New Home Company Inc (NYSE:NWHM), and EMCORE Corporation (NASDAQ:EMKR). This group of stocks’ market caps are similar to CODA’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| UONEK | 4 | 10765 | 0 |
| CRVS | 6 | 36290 | -1 |
| NWHM | 8 | 16623 | 2 |
| EMKR | 13 | 33826 | 2 |
| Average | 7.75 | 24376 | 0.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 7.75 hedge funds with bullish positions and the average amount invested in these stocks was $24 million. That figure was $3 million in CODA’s case. EMCORE Corporation (NASDAQ:EMKR) is the most popular stock in this table. On the other hand Urban One, Inc. (NASDAQ:UONEK) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks Coda Octopus Group, Inc. (NASDAQ:CODA) is even less popular than UONEK. Hedge funds dodged a bullet by taking a bearish stance towards CODA. Our calculations showed that the top 20 most popular hedge fund stocks returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately CODA wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); CODA investors were disappointed as the stock returned -12.3% 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 70 percent of these stocks already outperformed the market so far in Q4.
Disclosure: None. This article was originally published at Insider Monkey.
