Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed in recent years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets hoping that they will outperform the broader market. Our research shows that certain hedge funds do have great stock picking skills (and we can identify these hedge funds in advance pretty accurately), so let’s take a glance at the smart money sentiment towards Sanara MedTech Inc. (NASDAQ:SMTI).
Is SMTI a good stock to buy? Sanara MedTech Inc. (NASDAQ:SMTI) was in 5 hedge funds’ portfolios at the end of the first quarter of 2021. The all time high for this statistic is 3. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. SMTI has experienced an increase in support from the world’s most elite money managers of late. There were 3 hedge funds in our database with SMTI holdings at the end of December. Our calculations also showed that SMTI isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 115 percentage points since March 2017 (see the details here). That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Nick Thakore of Diametric Capital
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, an activist hedge fund owns nearly 40% of this $23 biotech stock and is trying to buy the rest for around $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 we’re going to take a look at the recent hedge fund action regarding Sanara MedTech Inc. (NASDAQ:SMTI).
Do Hedge Funds Think SMTI Is A Good Stock To Buy Now?
Heading into the second quarter of 2021, a total of 5 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 67% from one quarter earlier. By comparison, 0 hedge funds held shares or bullish call options in SMTI a year ago. With hedgies’ positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were upping their stakes meaningfully (or already accumulated large positions).
Among these funds, Opaleye Management held the most valuable stake in Sanara MedTech Inc. (NASDAQ:SMTI), which was worth $7 million at the end of the fourth quarter. On the second spot was Laurion Capital Management which amassed $1.5 million worth of shares. Diametric Capital, Millennium Management, and Prelude Capital (previously Springbok Capital) 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 Opaleye Management allocated the biggest weight to Sanara MedTech Inc. (NASDAQ:SMTI), around 1.03% of its 13F portfolio. Diametric Capital is also relatively very bullish on the stock, earmarking 0.38 percent of its 13F equity portfolio to SMTI.
As aggregate interest increased, specific money managers were breaking ground themselves. Opaleye Management, managed by James A. Silverman, created the most outsized position in Sanara MedTech Inc. (NASDAQ:SMTI). Opaleye Management had $7 million invested in the company at the end of the quarter. Benjamin A. Smith’s Laurion Capital Management also made a $1.5 million investment in the stock during the quarter. The only other fund with a brand new SMTI position is Gavin Saitowitz and Cisco J. del Valle’s Prelude Capital (previously Springbok Capital).
Let’s now review hedge fund activity in other stocks similar to Sanara MedTech Inc. (NASDAQ:SMTI). We will take a look at Ring Energy Inc (NYSE:REI), Unity Bancorp, Inc. (NASDAQ:UNTY), Gaia, Inc. (NASDAQ:GAIA), RISE Education Cayman Ltd (NASDAQ:REDU), Milestone Scientific, Inc. (NYSE:MLSS), vTv Therapeutics Inc (NASDAQ:VTVT), and Remark Holdings, Inc. (NASDAQ:MARK). This group of stocks’ market valuations match SMTI’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| REI | 7 | 2298 | 0 |
| UNTY | 4 | 20706 | -1 |
| GAIA | 12 | 35381 | -1 |
| REDU | 2 | 821 | 1 |
| MLSS | 2 | 421 | 1 |
| VTVT | 5 | 1287 | 2 |
| MARK | 9 | 10743 | 3 |
| Average | 5.9 | 10237 | 0.7 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 5.9 hedge funds with bullish positions and the average amount invested in these stocks was $10 million. That figure was $10 million in SMTI’s case. Gaia, Inc. (NASDAQ:GAIA) is the most popular stock in this table. On the other hand RISE Education Cayman Ltd (NASDAQ:REDU) is the least popular one with only 2 bullish hedge fund positions. Sanara MedTech Inc. (NASDAQ:SMTI) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for SMTI is 52. 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. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. 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 17.4% in 2021 through June 18th and surpassed the market again by 6.1 percentage points. Unfortunately SMTI wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); SMTI investors were disappointed as the stock returned -3.9% since the end of March (through 6/18) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2021.
Follow Sanara Medtech Inc. (OTCMKTS:SMTI)
Follow Sanara Medtech Inc. (OTCMKTS:SMTI)
Disclosure: None. This article was originally published at Insider Monkey.