Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that’s why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to smartest analysts and expensive data/information sources that individual investors can’t match. So should one consider investing in electroCore, Inc. (NASDAQ:ECOR)? The smart money sentiment can provide an answer to this question.
Hedge fund interest in electroCore, Inc. (NASDAQ:ECOR) 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 Blue Capital Reinsurance Holdings Ltd (NYSE:BCRH), Akerna Corp. (NASDAQ:KERN), and China Automotive Systems, Inc. (NASDAQ:CAAS) to gather more data points. Our calculations also showed that ECOR 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.
If you’d ask most traders, hedge funds are seen as slow, old investment tools of yesteryear. While there are greater than 8000 funds trading at the moment, Our researchers hone in on the masters of this club, about 750 funds. These money managers shepherd the majority of the smart money’s total capital, and by observing their finest stock picks, Insider Monkey has spotted several investment strategies that have historically outperformed the broader indices. Insider Monkey’s flagship short hedge fund strategy beat the S&P 500 short ETFs by around 20 percentage points per year since its inception in May 2014. Our portfolio of short stocks lost 27.8% since February 2017 (through November 21st) even though the market was up more than 39% during the same period. We just shared a list of 7 short targets in our latest quarterly update .
David E. Shaw of D.E. Shaw
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 we’re going to take a peek at the recent hedge fund action surrounding electroCore, Inc. (NASDAQ:ECOR).
How are hedge funds trading electroCore, Inc. (NASDAQ:ECOR)?
At Q3’s end, a total of 3 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the second quarter of 2019. On the other hand, there were a total of 7 hedge funds with a bullish position in ECOR a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Knoll Capital Management held the most valuable stake in electroCore, Inc. (NASDAQ:ECOR), which was worth $0.5 million at the end of the third quarter. On the second spot was D E Shaw which amassed $0 million worth of shares. Levin Capital Strategies was 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 Knoll Capital Management allocated the biggest weight to electroCore, Inc. (NASDAQ:ECOR), around 0.44% of its 13F portfolio. Levin Capital Strategies is also relatively very bullish on the stock, dishing out 0.003 percent of its 13F equity portfolio to ECOR.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Granite Point Capital. One hedge fund selling its entire position doesn’t always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don’t think this is the case in this case because only one of the 800+ hedge funds tracked by Insider Monkey identified as a viable investment and initiated a position in the stock (that fund was D E Shaw).
Let’s also examine hedge fund activity in other stocks similar to electroCore, Inc. (NASDAQ:ECOR). These stocks are Blue Capital Reinsurance Holdings Ltd (NYSE:BCRH), Akerna Corp. (NASDAQ:KERN), China Automotive Systems, Inc. (NASDAQ:CAAS), and InflaRx N.V. (NASDAQ:IFRX). All of these stocks’ market caps are closest to ECOR’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| BCRH | 3 | 4066 | 0 |
| KERN | 4 | 276 | 1 |
| CAAS | 1 | 714 | 0 |
| IFRX | 5 | 6029 | 1 |
| Average | 3.25 | 2771 | 0.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 3.25 hedge funds with bullish positions and the average amount invested in these stocks was $3 million. That figure was $1 million in ECOR’s case. InflaRx N.V. (NASDAQ:IFRX) is the most popular stock in this table. On the other hand China Automotive Systems, Inc. (NASDAQ:CAAS) is the least popular one with only 1 bullish hedge fund positions. electroCore, Inc. (NASDAQ:ECOR) 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 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately ECOR wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); ECOR investors were disappointed as the stock returned -31.1% during the first two months of the fourth 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 70 percent of these stocks already outperformed the market in Q4.
Disclosure: None. This article was originally published at Insider Monkey.
