The financial regulations require hedge funds and wealthy investors that exceeded the $100 million equity holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn’t the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds’ positions on September 30th. We at Insider Monkey have made an extensive database of nearly 750 of those established hedge funds and famous value investors’ filings. In this article, we analyze how these elite funds and prominent investors traded Hercules Technology Growth Capital Inc (NYSE:HTGC) based on those filings.
Hercules Technology Growth Capital Inc (NYSE:HTGC) was in 9 hedge funds’ portfolios at the end of September. HTGC has seen a decrease in hedge fund interest in recent months. There were 12 hedge funds in our database with HTGC holdings at the end of the previous quarter. Our calculations also showed that HTGC 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.
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 Griffin of Citadel Investment Group
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 take a glance at the key hedge fund action surrounding Hercules Technology Growth Capital Inc (NYSE:HTGC).
How have hedgies been trading Hercules Technology Growth Capital Inc (NYSE:HTGC)?
Heading into the fourth quarter of 2019, a total of 9 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -25% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards HTGC over the last 17 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Citadel Investment Group was the largest shareholder of Hercules Technology Growth Capital Inc (NYSE:HTGC), with a stake worth $7.4 million reported as of the end of September. Trailing Citadel Investment Group was Millennium Management, which amassed a stake valued at $6.7 million. McKinley Capital Management, Polaris Capital Management, and D E Shaw 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 McKinley Capital Management allocated the biggest weight to Hercules Technology Growth Capital Inc (NYSE:HTGC), around 0.29% of its 13F portfolio. Polaris Capital Management is also relatively very bullish on the stock, setting aside 0.13 percent of its 13F equity portfolio to HTGC.
Due to the fact that Hercules Technology Growth Capital Inc (NYSE:HTGC) has experienced a decline in interest from the smart money, it’s easy to see that there exists a select few funds who were dropping their full holdings in the third quarter. At the top of the heap, John Overdeck and David Siegel’s Two Sigma Advisors dropped the largest stake of the 750 funds followed by Insider Monkey, valued at close to $0.9 million in stock, and Richard Driehaus’s Driehaus Capital was right behind this move, as the fund dumped about $0.9 million worth. These moves are interesting, as total hedge fund interest dropped by 3 funds in the third quarter.
Let’s now review hedge fund activity in other stocks similar to Hercules Technology Growth Capital Inc (NYSE:HTGC). These stocks are First Busey Corporation (NASDAQ:BUSE), CorVel Corporation (NASDAQ:CRVL), FormFactor, Inc. (NASDAQ:FORM), and Rush Enterprises, Inc. (NASDAQ:RUSHA). This group of stocks’ market valuations are closest to HTGC’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| BUSE | 10 | 43773 | -1 |
| CRVL | 14 | 139590 | -1 |
| FORM | 19 | 68794 | 5 |
| RUSHA | 20 | 63597 | 0 |
| Average | 15.75 | 78939 | 0.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 15.75 hedge funds with bullish positions and the average amount invested in these stocks was $79 million. That figure was $23 million in HTGC’s case. Rush Enterprises, Inc. (NASDAQ:RUSHA) is the most popular stock in this table. On the other hand First Busey Corporation (NASDAQ:BUSE) is the least popular one with only 10 bullish hedge fund positions. Compared to these stocks Hercules Technology Growth Capital Inc (NYSE:HTGC) is even less popular than BUSE. 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. A small number of hedge funds were also right about betting on HTGC, though not to the same extent, as the stock returned 9.8% during the fourth quarter (through 11/30) and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.
