World-class money managers like Bill Ackman and Barry Rosenstein only invest their wealthy clients’ money after undertaking a rigorous examination of any potential stock. They are particularly successful in this regard when it comes to small-cap stocks, which their peerless research gives them a big information advantage on when it comes to judging their worth. It’s not surprising then that they generate their biggest returns from these stocks and invest more of their money in these stocks on average than other investors. It’s also not surprising then that we pay close attention to these picks ourselves and have built a market-beating investment strategy around them.
K2M Group Holdings Inc (NASDAQ:KTWO) was in 11 hedge funds’ portfolios at the end of September. KTWO has seen an increase in enthusiasm from smart money lately. There were 9 hedge funds in our database with KTWO positions at the end of the previous quarter. At the end of this article we will also compare KTWO to other stocks, including James River Group Holdings Ltd (NASDAQ:JRVR) and Kforce Inc. (NASDAQ:KFRC), to get a better sense of its popularity.
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Today there are many methods shareholders can use to value stocks. Two of the most useful methods are hedge fund and insider trading interest. We have shown that, historically, those who follow the best picks of the best hedge fund managers can outpace their index-focused peers by a superb margin (see the details here).
Now, we’re going to review the key action encompassing K2M Group Holdings Inc (NASDAQ:KTWO).
How are hedge funds trading K2M Group Holdings Inc (NASDAQ:KTWO)?
At the Q3’s end, a total of 11 of the hedge funds tracked by Insider Monkey were long this stock, a change of 22% from the second quarter. With hedgies’ positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Highland Capital Management, managed by James Dondero, holds the number one position in K2M Group Holdings Inc (NASDAQ:KTWO). Highland Capital Management has a $12.8 million position in the stock, comprising 0.4% of its 13F portfolio. Coming in second is Point72 Asset Management, led by Steve Cohen, holding a $9.5 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Remaining hedge funds and institutional investors that are bullish encompass Clifford Fox’s Columbus Circle Investors, Israel Englander’s Millennium Management and Richard Driehaus’ Driehaus Capital.
As aggregate interest increased, specific money managers were breaking ground themselves. Point72 Asset Management established the biggest position in K2M Group Holdings Inc (NASDAQ:KTWO). Peter Muller’s PDT Partners also made a $0.3 million investment in the stock during the quarter. The only other fund with a brand new KTWO position is Paul Tudor Jones’ Tudor Investment Corp.
Let’s go over hedge fund activity in other stocks similar to K2M Group Holdings Inc (NASDAQ:KTWO). We will take a look at James River Group Holdings Ltd (NASDAQ:JRVR), Kforce Inc. (NASDAQ:KFRC), and Coherus Biosciences Inc (NASDAQ:CHRS). This group of stocks’ market caps are closest to KTWO’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| JRVR | 13 | 448703 | 4 |
| KFRC | 20 | 71062 | 2 |
| CHRS | 17 | 98593 | -2 |
As you can see these stocks had an average of 16 hedge funds with bullish positions and the average amount invested in these stocks was $192 million, versus $45 million in KTWO’s case. Kforce Inc. (NASDAQ:KFRC) is the most popular stock in this table, while James River Group Holdings Ltd (NASDAQ:JRVR) is the least popular one. Compared to these stocks K2M Group Holdings Inc (NASDAQ:KTWO) is even less popular than James River Group Holdings. Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case more research is warranted.