Is The Spectranetics Corporation (SPNC) Going to Burn These Hedge Funds?

At Insider Monkey we track the activity of some of the best-performing hedge funds like Appaloosa Management, Baupost, and Third Point because we determined that some of the stocks that they are collectively bullish on can help us generate returns above the broader indices. Out of thousands of stocks that hedge funds invest in, small-caps can provide the best returns over the long term due to the fact that these companies are less efficiently priced and are usually under the radars of mass-media, analysts and dumb money. This is why we follow the smart money moves in the small-cap space.

The Spectranetics Corporation (NASDAQ:SPNC) investors should pay attention to an increase in hedge fund interest in recent months. SPNC was in 24 hedge funds’ portfolios at the end of the third quarter of 2015. There were 22 hedge funds in our database with SPNC holdings at the end of the previous quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Kansas City Life Insurance Co (NASDAQ:KCLI), Lumenis Ltd (NASDAQ:LMNS), and AAC Holdings Inc (NYSE:AAC) to gather more data points.

To most market participants, hedge funds are seen as unimportant, outdated investment tools of years past. While there are more than 8000 funds in operation today, We choose to focus on the elite of this club, about 700 funds. Most estimates calculate that this group of people orchestrate the lion’s share of all hedge funds’ total capital, and by tailing their first-class stock picks, Insider Monkey has deciphered various investment strategies that have historically outstripped the broader indices. Insider Monkey’s small-cap hedge fund strategy exceeded the S&P 500 index by 12 percentage points per annum for a decade in their back tests.

Keeping this in mind, we’re going to view the latest action encompassing The Spectranetics Corporation (NASDAQ:SPNC).

Hedge fund activity in The Spectranetics Corporation (NASDAQ:SPNC)

Heading into Q4, a total of 24 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 9% from the previous quarter. With the smart money’s sentiment swirling, there exists a select group of notable hedge fund managers who were boosting their stakes significantly (or already accumulated large positions).

Of the funds tracked by Insider Monkey, Visium Asset Management, managed by Jacob Gottlieb, holds the number one position in The Spectranetics Corporation (NASDAQ:SPNC). Visium Asset Management has a $23 million position in the stock, comprising 0.3% of its 13F portfolio. Coming in second is Millennium Management, managed by Israel Englander, which holds a $21.5 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Remaining hedge funds and institutional investors that hold long positions include Dmitry Balyasny’s Balyasny Asset Management, Brian Taylor’s Pine River Capital Management and Phill Gross and Robert Atchinson’s Adage Capital Management.

As one would reasonably expect, key hedge funds were breaking ground themselves. Visium Asset Management, managed by Jacob Gottlieb, established the most valuable position in The Spectranetics Corporation (NASDAQ:SPNC). Visium Asset Management had $23 million invested in the company at the end of the quarter. Dmitry Balyasny’s Balyasny Asset Management also made a $16.3 million investment in the stock during the quarter. The other funds with new positions in the stock are Kevin Kotler’s Broadfin Capital, Steven Boyd’s Armistice Capital, and Ken Greenberg and David Kim’s Ghost Tree Capital.

Let’s now review hedge fund activity in other stocks similar to The Spectranetics Corporation (NASDAQ:SPNC). We will take a look at Kansas City Life Insurance Co (NASDAQ:KCLI), Lumenis Ltd (NASDAQ:LMNS), AAC Holdings Inc (NYSE:AAC), and OncoMed Pharmaceuticals Inc (NASDAQ:OMED). This group of stocks’ market valuations are similar to SPNC’s market valuation.

As you can see these stocks had an average of 9 hedge funds with bullish positions and the average amount invested in these stocks was $35 million, significantly lower than the $149 million in SPNC’s case. AAC Holdings Inc (NYSE:AAC) is the most popular stock in this table with a total of 14 funds reporting long positions, while Kansas City Life Insurance Co (NASDAQ:KCLI) is the least popular one. Compared to these stocks The Spectranetics Corporation (NASDAQ:SPNC) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.