Investing in hedge funds can bring large profits, but it’s not for everybody, since hedge funds are available only for high-net-worth individuals. They generate significant returns for investors to justify their large fees and they allocate a lot of time and employ a complex analysis to determine the best stocks to invest in. A particularly interesting group of stocks that hedge funds like is the small-caps. The huge amount of capital does not allow hedge funds to invest a lot in small-caps, but our research showed that their most popular small-cap ideas are less efficiently priced and generate stronger returns than their large- and mega-cap picks and the broader market. That is why we follow the hedge fund activity in the small-cap space.
T2 Biosystems Inc (NASDAQ:TTOO) was in 6 hedge funds’ portfolios at the end of September. TTOO has seen an increase in enthusiasm from smart money lately. There were 5 hedge funds in our database with TTOO holdings at the end of the previous quarter. At the end of this article we will also compare TTOO to other stocks including Southern First Bancshares, Inc. (NASDAQ:SFST), First Northwest BanCorp (NASDAQ:FNWB), and Codorus Valley Bancorp, Inc. (NASDAQ:CVLY) to get a better sense of its popularity.
Follow T2 Biosystems Inc. (NASDAQ:TTOO)
Follow T2 Biosystems Inc. (NASDAQ:TTOO)
We follow over 700 hedge funds and other institutional investors and by analyzing their quarterly 13F filings, we identify stocks that they are collectively bullish on and develop investment strategies based on this data. One strategy that outperformed the market over the last year involves selecting the 100 best-performing funds and identifying the 30 mid-cap stocks that they are collectively most bullish on. Over the past year, this strategy generated returns of 18%, topping the 8% gain registered by S&P 500 ETFs. We launched this strategy 2.5 years ago and it returned more than 39% since then, vs. 22% gain registered by the S&P 500 ETFs.
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With all of this in mind, we’re going to take a gander at the latest action surrounding T2 Biosystems Inc (NASDAQ:TTOO).
What does the smart money think about T2 Biosystems Inc (NASDAQ:TTOO)?
At the end of the third quarter, a total of 6 of the hedge funds tracked by Insider Monkey held long positions in this stock, up by 20% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards TTOO over the last 5 quarters. With hedge funds’ sentiment swirling, there exists a few notable hedge fund managers who were upping their holdings meaningfully (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Dennis Purcell’s Aisling Capital has the largest position in T2 Biosystems Inc (NASDAQ:TTOO), worth close to $20.5 million, accounting for 4.2% of its total 13F portfolio. Coming in second is Richard Mashaal of Rima Senvest Management, with a $13.7 million position; 1% of its 13F portfolio is allocated to the stock. Other peers that are bullish comprise Julian Robertson’s Tiger Management, Steve Cohen’s Point72 Asset Management and Efrem Kamen’s Pura Vida Investments. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.
Consequently, key hedge funds were breaking ground themselves. Pura Vida Investments assembled the most outsized position in T2 Biosystems Inc (NASDAQ:TTOO). Pura Vida Investments had $0.4 million invested in the company at the end of the quarter. Daniel S. Och’s OZ Management also initiated a $0.2 million position during the quarter.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as T2 Biosystems Inc (NASDAQ:TTOO) but similarly valued. These stocks are Southern First Bancshares, Inc. (NASDAQ:SFST), First Northwest BanCorp (NASDAQ:FNWB), Codorus Valley Bancorp, Inc. (NASDAQ:CVLY), and Central Valley Community Bancorp (NASDAQ:CVCY). This group of stocks’ market caps are similar to TTOO’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SFST | 6 | 22351 | 0 |
| FNWB | 4 | 14324 | -1 |
| CVLY | 3 | 9360 | -1 |
| CVCY | 4 | 9864 | 4 |
As you can see these stocks had an average of 4 hedge funds with bullish positions and the average amount invested in these stocks was $14 million. That figure was $50 million in TTOO’s case. Southern First Bancshares, Inc. (NASDAQ:SFST) is the most popular stock in this table. On the other hand Codorus Valley Bancorp, Inc. (NASDAQ:CVLY) is the least popular one with only 3 bullish hedge fund positions. T2 Biosystems Inc (NASDAQ:TTOO) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard SFST might be a better candidate to consider taking a long position in.
Disclosure: None
