Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips or bumps on the charts usually don’t make them change their opinion towards a company. This time it may be different. The coronavirus pandemic destroyed the high correlations among major industries and asset classes. We are now in a stock pickers market where fundamentals of a stock have more effect on the price than the overall direction of the market. As a result we observe sudden and large changes in hedge fund positions depending on the news flow. Let’s take a look at the hedge fund sentiment towards Electromed, Inc. (NYSE:ELMD) to find out whether there were any major changes in hedge funds’ views.
Is ELMD a good stock to buy? The best stock pickers were cutting their exposure. The number of bullish hedge fund positions were trimmed by 1 in recent months. Electromed, Inc. (NYSE:ELMD) was in 5 hedge funds’ portfolios at the end of the first quarter of 2021. The all time high for this statistic is 6. Our calculations also showed that ELMD isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).
In the financial world there are a large number of gauges stock traders have at their disposal to evaluate stocks. A couple of the most underrated gauges are hedge fund and insider trading signals. Our researchers have shown that, historically, those who follow the top picks of the elite investment managers can outperform their index-focused peers by a very impressive amount (see the details here). Also, our monthly newsletter’s portfolio of long stock picks returned 206.8% since March 2017 (through May 2021) and beat the S&P 500 Index by more than 115 percentage points. You can download a sample issue of this newsletter on our website .
Noam Gottesman of GLG Partners
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, an activist hedge fund owns nearly 40% of this $23 biotech stock and is trying to buy the rest for around $50. So, we recommended a long position to our monthly premium newsletter subscribers. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. With all of this in mind we’re going to take a gander at the latest hedge fund action encompassing Electromed, Inc. (NYSE:ELMD).
Do Hedge Funds Think ELMD Is A Good Stock To Buy Now?
Heading into the second quarter of 2021, a total of 5 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -17% from one quarter earlier. By comparison, 4 hedge funds held shares or bullish call options in ELMD a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Renaissance Technologies was the largest shareholder of Electromed, Inc. (NYSE:ELMD), with a stake worth $2.2 million reported as of the end of March. Trailing Renaissance Technologies was Arrowstreet Capital, which amassed a stake valued at $0.8 million. AQR Capital Management, GLG Partners, and Two Sigma Advisors 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 Renaissance Technologies allocated the biggest weight to Electromed, Inc. (NYSE:ELMD), around 0.0028% of its 13F portfolio. Arrowstreet Capital is also relatively very bullish on the stock, designating 0.001 percent of its 13F equity portfolio to ELMD.
Due to the fact that Electromed, Inc. (NYSE:ELMD) has experienced falling interest from the aggregate hedge fund industry, it’s easy to see that there is a sect of hedgies that decided to sell off their entire stakes last quarter. It’s worth mentioning that Roger Ibbotson’s Zebra Capital Management dumped the biggest stake of all the hedgies monitored by Insider Monkey, valued at about $0.3 million in stock. Ken Griffin’s fund, Citadel Investment Group, also said goodbye to its stock, about $0.2 million worth. These moves are important to note, as total hedge fund interest dropped by 1 funds last quarter.
Let’s also examine hedge fund activity in other stocks similar to Electromed, Inc. (NYSE:ELMD). These stocks are FAT Brands Inc. (NASDAQ:FAT), Entera Bio Ltd. (NASDAQ:ENTX), Baudax Bio, Inc. (NASDAQ:BXRX), ARC Document Solutions Inc (NYSE:ARC), Universal Stainless & Alloy Products (NASDAQ:USAP), Research Frontiers, Inc. (NASDAQ:REFR), and Trinity Biotech plc (NASDAQ:TRIB). This group of stocks’ market valuations match ELMD’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| FAT | 4 | 6123 | 1 |
| ENTX | 2 | 606 | 0 |
| BXRX | 4 | 563 | -5 |
| ARC | 6 | 13716 | 0 |
| USAP | 6 | 15970 | 0 |
| REFR | 2 | 124 | 0 |
| TRIB | 5 | 7584 | 1 |
| Average | 4.1 | 6384 | -0.4 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 4.1 hedge funds with bullish positions and the average amount invested in these stocks was $6 million. That figure was $4 million in ELMD’s case. ARC Document Solutions Inc (NYSE:ARC) is the most popular stock in this table. On the other hand Entera Bio Ltd. (NASDAQ:ENTX) is the least popular one with only 2 bullish hedge fund positions. Electromed, Inc. (NYSE:ELMD) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for ELMD is 66.5. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 17.4% in 2021 through June 18th and still beat the market by 6.1 percentage points. Hedge funds were also right about betting on ELMD, though not to the same extent, as the stock returned 5.3% since Q1 (through June 18th) and outperformed the market as well.
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Disclosure: None. This article was originally published at Insider Monkey.
