Soliton, Inc. (SOLY): Hedge Funds Are Snapping Up

Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track nearly 900 active prominent money managers and analyze their quarterly 13F filings. The stocks that are heavily bought by hedge funds historically outperformed the market, though there is no shortage of high profile failures like hedge funds’ 2018 losses in Facebook and Apple. Let’s take a closer look at what the funds we track think about Soliton, Inc. (NASDAQ:SOLY) in this article.

Soliton, Inc. (NASDAQ:SOLY) has experienced an increase in enthusiasm from smart money recently. Soliton, Inc. (NASDAQ:SOLY) was in 4 hedge funds’ portfolios at the end of March. The all time high for this statistic is 7. Our calculations also showed that SOLY isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 115 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.

Michael Castor of Sio Capital

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, an activist hedge fund wants to buy this $28 biotech stock for $50. So, we recommended a long position to our monthly premium newsletter subscribers. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. Now let’s view the key hedge fund action encompassing Soliton, Inc. (NASDAQ:SOLY).

Do Hedge Funds Think SOLY Is A Good Stock To Buy Now?

At the end of the first quarter, a total of 4 of the hedge funds tracked by Insider Monkey were long this stock, a change of 100% from the previous quarter. By comparison, 1 hedge funds held shares or bullish call options in SOLY a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

According to Insider Monkey’s hedge fund database, Michael Castor’s Sio Capital has the number one position in Soliton, Inc. (NASDAQ:SOLY), worth close to $14.5 million, accounting for 2.9% of its total 13F portfolio. The second most bullish fund manager is Pura Vida Investments, managed by Efrem Kamen, which holds a $4.2 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Some other peers that are bullish encompass John Overdeck and David Siegel’s Two Sigma Advisors, Ken Griffin’s Citadel Investment Group and . In terms of the portfolio weights assigned to each position Sio Capital allocated the biggest weight to Soliton, Inc. (NASDAQ:SOLY), around 2.94% of its 13F portfolio. Pura Vida Investments is also relatively very bullish on the stock, dishing out 0.12 percent of its 13F equity portfolio to SOLY.

Consequently, some big names were leading the bulls’ herd. Pura Vida Investments, managed by Efrem Kamen, initiated the biggest position in Soliton, Inc. (NASDAQ:SOLY). Pura Vida Investments had $4.2 million invested in the company at the end of the quarter. John Overdeck and David Siegel’s Two Sigma Advisors also made a $1.6 million investment in the stock during the quarter. The only other fund with a brand new SOLY position is Ken Griffin’s Citadel Investment Group.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Soliton, Inc. (NASDAQ:SOLY) but similarly valued. These stocks are UFP Technologies, Inc. (NASDAQ:UFPT), HF Foods Group Inc. (NASDAQ:HFFG), OneSmart International Education Group Limited (NYSE:ONE), Infrastructure and Energy Alternatives, Inc. (NASDAQ:IEA), LifeMD, Inc. (NASDAQ:LFMD), Cue Biopharma, Inc. (NASDAQ:CUE), and Quotient Limited (NASDAQ:QTNT). This group of stocks’ market values are similar to SOLY’s market value.

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As you can see these stocks had an average of 11.3 hedge funds with bullish positions and the average amount invested in these stocks was $76 million. That figure was $21 million in SOLY’s case. OneSmart International Education Group Limited (NYSE:ONE) is the most popular stock in this table. On the other hand HF Foods Group Inc. (NASDAQ:HFFG) is the least popular one with only 1 bullish hedge fund positions. Soliton, Inc. (NASDAQ:SOLY) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for SOLY is 29.9. 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. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 17.2% in 2021 through June 11th and still beat the market by 3.3 percentage points. A small number of hedge funds were also right about betting on SOLY as the stock returned 27.3% since the end of the first quarter (through 6/11) and outperformed the market by an even larger margin.

Disclosure: None. This article was originally published at Insider Monkey.