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 Obalon Therapeutics, Inc. (NASDAQ:OBLN)? The smart money sentiment can provide an answer to this question.
Obalon Therapeutics, Inc. (NASDAQ:OBLN) investors should be aware of an increase in hedge fund sentiment recently. Obalon Therapeutics, Inc. (NASDAQ:OBLN) was in 3 hedge funds’ portfolios at the end of March. The all time high for this statistic is 5. Our calculations also showed that OBLN isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).
According to most stock holders, hedge funds are perceived as worthless, outdated investment tools of yesteryear. While there are over 8000 funds in operation at present, We look at the leaders of this group, approximately 850 funds. These hedge fund managers handle bulk of all hedge funds’ total asset base, and by tracking their highest performing investments, Insider Monkey has brought to light a few investment strategies that have historically outrun Mr. Market. Insider Monkey’s flagship short hedge fund strategy outperformed the S&P 500 short ETFs by around 20 percentage points a year since its inception in March 2017. 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 .
Jim Simons of Renaissance Technologies
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, an activist hedge fund wants to buy this $28 biotech stock for $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. Keeping this in mind let’s review the new hedge fund action encompassing Obalon Therapeutics, Inc. (NASDAQ:OBLN).
Do Hedge Funds Think OBLN Is A Good Stock To Buy Now?
At first quarter’s end, a total of 3 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 50% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in OBLN over the last 23 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Obalon Therapeutics, Inc. (NASDAQ:OBLN) was held by Armistice Capital, which reported holding $3.1 million worth of stock at the end of December. It was followed by Renaissance Technologies with a $0.2 million position. The only other hedge fund that is bullish on the company was Citadel Investment Group.
As one would reasonably expect, specific money managers were leading the bulls’ herd. Renaissance Technologies, established the biggest position in Obalon Therapeutics, Inc. (NASDAQ:OBLN). Renaissance Technologies had $0.2 million invested in the company at the end of the quarter.
Let’s now take a look at hedge fund activity in other stocks similar to Obalon Therapeutics, Inc. (NASDAQ:OBLN). We will take a look at Forward Industries, Inc. (NASDAQ:FORD), Coffee Holding Co., Inc. (NASDAQ:JVA), Performance Shipping Inc. (NASDAQ:PSHG), Tenax Therapeutics Inc (NASDAQ:TENX), Unico American Corporation (NASDAQ:UNAM), Summer Infant, Inc. (NASDAQ:SUMR), and AmpliTech Group, Inc. (NASDAQ:AMPG). This group of stocks’ market valuations match OBLN’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| FORD | 2 | 2618 | 1 |
| JVA | 2 | 3908 | 0 |
| PSHG | 3 | 1054 | 2 |
| TENX | 3 | 5289 | -1 |
| UNAM | 1 | 126 | 0 |
| SUMR | 3 | 12015 | 0 |
| AMPG | 2 | 1591 | 2 |
| Average | 2.3 | 3800 | 0.6 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 2.3 hedge funds with bullish positions and the average amount invested in these stocks was $4 million. That figure was $3 million in OBLN’s case. Performance Shipping Inc. (NASDAQ:PSHG) is the most popular stock in this table. On the other hand Unico American Corporation (NASDAQ:UNAM) is the least popular one with only 1 bullish hedge fund positions. Obalon Therapeutics, Inc. (NASDAQ:OBLN) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for OBLN is 74. 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 17.2% in 2021 through June 11th and still beat the market by 3.3 percentage points. Hedge funds were also right about betting on OBLN as the stock returned 16% since the end of Q1 (through 6/11) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.
