The financial regulations require hedge funds and wealthy investors that exceeded the $100 million 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 March 31st. We at Insider Monkey have made an extensive database of more than 866 of those established hedge funds and famous value investors’ filings. In this article, we analyze how these elite funds and prominent investors traded Psychemedics Corp. (NASDAQ:PMD) based on those filings.
Is PMD a good stock to buy? Psychemedics Corp. (NASDAQ:PMD) investors should be aware of a decrease in enthusiasm from smart money lately. Psychemedics Corp. (NASDAQ:PMD) was in 3 hedge funds’ portfolios at the end of March. The all time high for this statistic is 6. There were 4 hedge funds in our database with PMD positions at the end of the fourth quarter. Our calculations also showed that PMD isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).
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 S&P 500 ETFs by more than 115 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.
Fred DiSanto of Ancora Advisors
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. With all of this in mind we’re going to take a look at the recent hedge fund action encompassing Psychemedics Corp. (NASDAQ:PMD).
Do Hedge Funds Think PMD Is A Good Stock To Buy Now?
Heading into the second quarter of 2021, a total of 3 of the hedge funds tracked by Insider Monkey were long this stock, a change of -25% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards PMD over the last 23 quarters. With hedge funds’ capital changing hands, there exists a few notable hedge fund managers who were increasing their holdings substantially (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Renaissance Technologies has the largest position in Psychemedics Corp. (NASDAQ:PMD), worth close to $2.6 million, amounting to less than 0.1%% of its total 13F portfolio. Sitting at the No. 2 spot is Ali Motamed of Invenomic Capital Management, with a $0.7 million position; the fund has 0.2% of its 13F portfolio invested in the stock. In terms of the portfolio weights assigned to each position Invenomic Capital Management allocated the biggest weight to Psychemedics Corp. (NASDAQ:PMD), around 0.16% of its 13F portfolio. Ancora Advisors is also relatively very bullish on the stock, designating 0.01 percent of its 13F equity portfolio to PMD.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Royce & Associates. One hedge fund selling its entire position doesn’t always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don’t think this is the case in this case because none of the 750+ hedge funds tracked by Insider Monkey identified PMD as a viable investment and initiated a position in the stock.
Let’s now take a look at hedge fund activity in other stocks similar to Psychemedics Corp. (NASDAQ:PMD). We will take a look at Summit Wireless Technologies, Inc. (NASDAQ:WISA), Kewaunee Scientific Corporation (NASDAQ:KEQU), Fuwei Films (Holdings) Co., Ltd (NASDAQ:FFHL), Siyata Mobile Inc. (NASDAQ:SYTA), Staffing 360 Solutions, Inc. (NASDAQ:STAF), Evolving Systems Inc (NASDAQ:EVOL), and Bonso Electronics International Inc. (NASDAQ:BNSO). All of these stocks’ market caps match PMD’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| WISA | 4 | 619 | 2 |
| KEQU | 3 | 3008 | 0 |
| FFHL | 1 | 2962 | 0 |
| SYTA | 1 | 755 | 0 |
| STAF | 1 | 181 | 0 |
| EVOL | 2 | 2427 | 0 |
| BNSO | 2 | 1286 | 1 |
| Average | 2 | 1605 | 0.4 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 2 hedge funds with bullish positions and the average amount invested in these stocks was $2 million. That figure was $4 million in PMD’s case. Summit Wireless Technologies, Inc. (NASDAQ:WISA) is the most popular stock in this table. On the other hand Fuwei Films (Holdings) Co., Ltd (NASDAQ:FFHL) is the least popular one with only 1 bullish hedge fund positions. Psychemedics Corp. (NASDAQ:PMD) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for PMD is 52.3. 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 PMD as the stock returned 33.1% 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.
