Before putting in our own effort and resources into finding a good investment, we can quickly utilize hedge fund expertise to give us a quick glimpse of whether that stock could make for a good addition to our portfolios. The odds are not exactly stacked in investors’ favor when it comes to beating the market, as evidenced by the fact that less than 49% of the stocks in the S&P 500 did so during the 12-month period ending October 30. However, 63% of hedge funds’ top 30 stock picks from the index did beat the market, and returned nearly twice as much on average as the index. Thus, we can see that the tireless research and efforts of hedge funds to identify winning stocks can work to our advantage when we know how to use the data. While not all of their picks will be winners, our odds are much better following their best stock picks than trying to go it alone.
Neonode, Inc (NASDAQ:NEON) was in 6 hedge funds’ portfolios at the end of the third quarter of 2015. NEON investors should pay attention to a decrease in enthusiasm from smart money recently. There were 7 hedge funds in our database with NEON positions 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 Mitek Systems, Inc. (NASDAQ:MITK), Calithera Biosciences Inc (NASDAQ:CALA), and Alimera Sciences Inc (NASDAQ:ALIM) to gather more data points.
Follow Neonode Inc. (NASDAQ:NEON)
Follow Neonode Inc. (NASDAQ:NEON)
Today there are a large number of signals stock market investors can use to size up publicly traded companies. Two of the most innovative signals are hedge fund and insider trading interest. We have shown that, historically, those who follow the best picks of the top investment managers can outclass their index-focused peers by a superb amount (see the details here).
With all of this in mind, let’s review the key action surrounding Neonode, Inc (NASDAQ:NEON).
How have hedgies been trading Neonode, Inc (NASDAQ:NEON)?
Heading into Q4, a total of 6 of the hedge funds tracked by Insider Monkey were long this stock, a change of -14% from one quarter earlier. With hedge funds’ positions undergoing their usual ebb and flow, there exists an “upper tier” of noteworthy hedge fund managers who were boosting their stakes significantly (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, Chuck Royce’s Royce & Associates has the largest position in Neonode, Inc (NASDAQ:NEON), worth close to $2.3 million, comprising less than 0.1%% of its total 13F portfolio. Sitting at the No. 2 spot is Coe Capital Management, managed by Mark Coe, which holds a $0.6 million position; the fund has 0.2% of its 13F portfolio invested in the stock. Some other hedge funds and institutional investors that hold long positions encompass Ken Griffin’s Citadel Investment Group, D. E. Shaw and David Cohen and Harold Levy’s Iridian Asset Management.
Because Neonode, Inc (NASDAQ:NEON) has experienced a bearish sentiment from hedge fund managers, logic holds that there lies a certain “tier” of hedgies who sold off their entire stakes by the end of the third quarter. At the top of the heap, Joseph A. Jolson’s Harvest Capital Strategies cut the biggest stake of the 700 funds followed by Insider Monkey, totaling about $0.4 million in stock. Matthew Hulsizer’s fund, PEAK6 Capital Management, also dumped its holding, about $0.1 million worth. These bearish behaviors are important to note, as total hedge fund interest fell by 1 funds by the end of the third quarter.
Let’s go over hedge fund activity in other stocks similar to Neonode, Inc (NASDAQ:NEON). These stocks are Mitek Systems, Inc. (NASDAQ:MITK), Calithera Biosciences Inc (NASDAQ:CALA), Alimera Sciences Inc (NASDAQ:ALIM), and First Trust Strategic High Income Fd II (NYSE:FHY). This group of stocks’ market caps are similar to NEON’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| MITK | 6 | 1962 | -1 |
| CALA | 5 | 21817 | -1 |
| ALIM | 10 | 35337 | -1 |
| FHY | 4 | 5106 | 0 |
As you can see these stocks had an average of 6 hedge funds with bullish positions and the average amount invested in these stocks was $16 million. Alimera Sciences Inc (NASDAQ:ALIM) is the most popular stock in this table, while First Trust Strategic High Income Fd II (NYSE:FHY) is the least popular one with only 4 bullish hedge fund positions. With an aggregate value of hedge funds’ holdings worth $3.0 million, Neonode, Inc (NASDAQ:NEON) 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. In this regard ALIM might be a better candidate to consider a long position.
