We are still in an overall bull market and many stocks that smart money investors were piling into surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Hedge funds’ top 3 stock picks returned 41.7% this year and beat the S&P 500 ETFs by 14 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like Avid Bioservices, Inc. (NASDAQ:CDMO).
Avid Bioservices, Inc. (NASDAQ:CDMO) investors should pay attention to an increase in enthusiasm from smart money in recent months. Our calculations also showed that CDMO isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 91% since May 2014 and outperformed the Russell 2000 ETFs by nearly 40 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Israel Englander of Millennium Management
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds‘ buy/sell signals. Let’s review the recent hedge fund action encompassing Avid Bioservices, Inc. (NASDAQ:CDMO).
How have hedgies been trading Avid Bioservices, Inc. (NASDAQ:CDMO)?
At Q3’s end, a total of 8 of the hedge funds tracked by Insider Monkey were long this stock, a change of 14% from the previous quarter. On the other hand, there were a total of 11 hedge funds with a bullish position in CDMO a year ago. With the smart money’s positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Iszo Capital, managed by Brian Sheehy, holds the number one position in Avid Bioservices, Inc. (NASDAQ:CDMO). Iszo Capital has a $24 million position in the stock, comprising 31.8% of its 13F portfolio. The second largest stake is held by Israel Englander of Millennium Management, with a $4.4 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Remaining peers that hold long positions consist of Chuck Royce’s Royce & Associates, Renaissance Technologies and David Harding’s Winton Capital Management. In terms of the portfolio weights assigned to each position Iszo Capital allocated the biggest weight to Avid Bioservices, Inc. (NASDAQ:CDMO), around 31.8% of its 13F portfolio. Algert Coldiron Investors is also relatively very bullish on the stock, designating 0.04 percent of its 13F equity portfolio to CDMO.
Consequently, key money managers have been driving this bullishness. Winton Capital Management, managed by David Harding, initiated the largest position in Avid Bioservices, Inc. (NASDAQ:CDMO). Winton Capital Management had $0.4 million invested in the company at the end of the quarter. Peter Algert and Kevin Coldiron’s Algert Coldiron Investors also initiated a $0.1 million position during the quarter. The only other fund with a new position in the stock is Andre F. Perold’s HighVista Strategies.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Avid Bioservices, Inc. (NASDAQ:CDMO) but similarly valued. These stocks are Oxford Square Capital Corp. (NASDAQ:OXSQ), Triple-S Management Corp.(NYSE:GTS), Gladstone Capital Corporation (NASDAQ:GLAD), and Cresud S.A.C.I.F. y A. (NASDAQ:CRESY). This group of stocks’ market values are similar to CDMO’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| OXSQ | 8 | 6980 | 3 |
| GTS | 18 | 88802 | 5 |
| GLAD | 5 | 4387 | 0 |
| CRESY | 7 | 12859 | 0 |
| Average | 9.5 | 28257 | 2 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 9.5 hedge funds with bullish positions and the average amount invested in these stocks was $28 million. That figure was $32 million in CDMO’s case. Triple-S Management Corp.(NYSE:GTS) is the most popular stock in this table. On the other hand Gladstone Capital Corporation (NASDAQ:GLAD) is the least popular one with only 5 bullish hedge fund positions. Avid Bioservices, Inc. (NASDAQ:CDMO) is not the least popular stock in this group but hedge fund interest is still below average. 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 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately CDMO wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); CDMO investors were disappointed as the stock returned 4% during the first two months of the fourth quarter 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 70 percent of these stocks already outperformed the market in Q4.
Disclosure: None. This article was originally published at Insider Monkey.
