Reputable billionaire investors such as Jim Simons, Cliff Asness and David Tepper generate exorbitant profits for their wealthy accredited investors (a minimum of $1 million in investable assets would be required to invest in a hedge fund and most successful hedge funds won’t accept your savings unless you commit at least $5 million) by pinpointing winning small-cap stocks. There is little or no publicly-available information at all on some of these small companies, which makes it hard for an individual investor to pin down a winner within the small-cap space. However, hedge funds and other big asset managers can do the due diligence and analysis for you instead, thanks to their highly-skilled research teams and vast resources to conduct an appropriate evaluation process. Looking for potential winners within the small-cap galaxy of stocks? We believe following the smart money is a good starting point.
PolarityTE, Inc. (NASDAQ:PTE) investors should pay attention to a decrease in hedge fund sentiment recently. Our calculations also showed that PTE isn’t among the 30 most popular stocks among hedge funds.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 30.9% through May 30, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
We’re going to take a gander at the key hedge fund action regarding PolarityTE, Inc. (NASDAQ:PTE).
How are hedge funds trading PolarityTE, Inc. (NASDAQ:PTE)?
At Q1’s end, a total of 10 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -23% from one quarter earlier. By comparison, 3 hedge funds held shares or bullish call options in PTE a year ago. With the smart money’s capital changing hands, there exists a few noteworthy hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).
The largest stake in PolarityTE, Inc. (NASDAQ:PTE) was held by Castle Hook Partners, which reported holding $11.4 million worth of stock at the end of March. It was followed by DSAM Partners with a $11.3 million position. Other investors bullish on the company included Ardsley Partners, Healthcor Management LP, and Millennium Management.
Because PolarityTE, Inc. (NASDAQ:PTE) has faced falling interest from hedge fund managers, it’s easy to see that there was a specific group of funds that elected to cut their full holdings in the third quarter. Interestingly, Ari Zweiman’s 683 Capital Partners sold off the largest position of the 700 funds followed by Insider Monkey, comprising close to $9.2 million in stock, and James A. Silverman’s Opaleye Management was right behind this move, as the fund cut about $5.4 million worth. These moves are important to note, as total hedge fund interest fell by 3 funds in the third quarter.
Let’s check out hedge fund activity in other stocks similar to PolarityTE, Inc. (NASDAQ:PTE). These stocks are Kamada Ltd (NASDAQ:KMDA), MBT Financial Corp. (NASDAQ:MBTF), Investar Holding Corporation (NASDAQ:ISTR), and Premier Financial Bancorp, Inc. (NASDAQ:PFBI). This group of stocks’ market valuations are closest to PTE’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| KMDA | 4 | 9017 | 1 |
| MBTF | 7 | 15340 | 2 |
| ISTR | 5 | 30928 | 0 |
| PFBI | 5 | 10156 | 1 |
| Average | 5.25 | 16360 | 1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 5.25 hedge funds with bullish positions and the average amount invested in these stocks was $16 million. That figure was $44 million in PTE’s case. MBT Financial Corp. (NASDAQ:MBTF) is the most popular stock in this table. On the other hand Kamada Ltd (NASDAQ:KMDA) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks PolarityTE, Inc. (NASDAQ:PTE) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. Unfortunately PTE wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on PTE were disappointed as the stock returned -45% during the same period 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 13 of these stocks already outperformed the market in Q2.
Disclosure: None. This article was originally published at Insider Monkey.