Out of thousands of stocks that are currently traded on the market, it is difficult to identify those that will really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of nearly 817 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has the potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about ShotSpotter, Inc. (NASDAQ:SSTI).
Is SSTI a good stock to buy now? Money managers were getting more bullish. The number of bullish hedge fund bets increased by 3 recently. ShotSpotter, Inc. (NASDAQ:SSTI) was in 10 hedge funds’ portfolios at the end of September. The all time high for this statistics is 8. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that SSTI isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
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 66 percentage points since March 2017 (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 13% through November 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Ken Griffin of Citadel Investment Group
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. 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 website. With all of this in mind we’re going to take a look at the new hedge fund action regarding ShotSpotter, Inc. (NASDAQ:SSTI).
Do Hedge Funds Think SSTI Is A Good Stock To Buy Now?
At the end of the third quarter, a total of 10 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 43% from one quarter earlier. On the other hand, there were a total of 6 hedge funds with a bullish position in SSTI a year ago. With hedge funds’ sentiment swirling, there exists a few key hedge fund managers who were adding to their stakes significantly (or already accumulated large positions).
Among these funds, Nine Ten Partners held the most valuable stake in ShotSpotter, Inc. (NASDAQ:SSTI), which was worth $17.9 million at the end of the third quarter. On the second spot was Manatuck Hill Partners which amassed $2.2 million worth of shares. Renaissance Technologies, Two Sigma Advisors, and Citadel Investment Group 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 Nine Ten Partners allocated the biggest weight to ShotSpotter, Inc. (NASDAQ:SSTI), around 3.72% of its 13F portfolio. Manatuck Hill Partners is also relatively very bullish on the stock, setting aside 1 percent of its 13F equity portfolio to SSTI.
As industrywide interest jumped, specific money managers were breaking ground themselves. Renaissance Technologies, assembled the most valuable position in ShotSpotter, Inc. (NASDAQ:SSTI). Renaissance Technologies had $1.9 million invested in the company at the end of the quarter. Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital also initiated a $0.8 million position during the quarter. The only other fund with a new position in the stock is Paul Marshall and Ian Wace’s Marshall Wace LLP.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as ShotSpotter, Inc. (NASDAQ:SSTI) but similarly valued. These stocks are Waitr Holdings Inc. (NASDAQ:WTRH), iBio, Inc. (NYSE:IBIO), The First of Long Island Corporation (NASDAQ:FLIC), Hoegh LNG Partners LP (NYSE:HMLP), Customers Bancorp Inc (NYSE:CUBI), IMARA Inc. (NASDAQ:IMRA), and Alliance Resource Partners, L.P. (NASDAQ:ARLP). This group of stocks’ market valuations resemble SSTI’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| WTRH | 13 | 62868 | -4 |
| IBIO | 3 | 939 | 1 |
| FLIC | 10 | 22272 | -1 |
| HMLP | 5 | 12459 | 0 |
| CUBI | 10 | 12964 | -5 |
| IMRA | 5 | 78482 | -1 |
| ARLP | 4 | 16859 | 0 |
| Average | 7.1 | 29549 | -1.4 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 7.1 hedge funds with bullish positions and the average amount invested in these stocks was $30 million. That figure was $27 million in SSTI’s case. Waitr Holdings Inc. (NASDAQ:WTRH) is the most popular stock in this table. On the other hand iBio, Inc. (NYSE:IBIO) is the least popular one with only 3 bullish hedge fund positions. ShotSpotter, Inc. (NASDAQ:SSTI) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for SSTI is 73. 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 positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 32.9% in 2020 through December 8th and beat the market again by 16.2 percentage points. Unfortunately SSTI wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on SSTI were disappointed as the stock returned 9.3% since the end of September (through 12/8) 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 many of these stocks already outperformed the market so far this year.
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Disclosure: None. This article was originally published at Insider Monkey.
