Where Do Hedge Funds Stand On Fathom Holdings Inc. (FTHM)?

In this article we will analyze whether Fathom Holdings Inc. (NASDAQ:FTHM) is a good investment right now by following the lead of some of the best investors in the world and piggybacking their ideas. There’s no better way to get these firms’ immense resources and analytical capabilities working for us than to follow their lead into their best ideas. While not all of these picks will be winners, our research shows that these picks historically outperformed the market by double digits annually.

Fathom Holdings Inc. (NASDAQ:FTHM) was in 6 hedge funds’ portfolios at the end of March. The all time high for this statistic is 5. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. FTHM has seen an increase in enthusiasm from smart money in recent months. There were 5 hedge funds in our database with FTHM positions at the end of the fourth quarter. Our calculations also showed that FTHM 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.

Ryan Tolkin, CIO of Schonfeld Strategic Advisors

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, an activist hedge fund owns nearly 40% of this $24 biotech stock and is trying to buy the rest for around $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. With all of this in mind we’re going to analyze the recent hedge fund action encompassing Fathom Holdings Inc. (NASDAQ:FTHM).

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

At first quarter’s end, a total of 6 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 20% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards FTHM over the last 23 quarters. With hedge funds’ sentiment swirling, there exists a few key hedge fund managers who were increasing their holdings meaningfully (or already accumulated large positions).

Among these funds, Manatuck Hill Partners held the most valuable stake in Fathom Holdings Inc. (NASDAQ:FTHM), which was worth $8.8 million at the end of the fourth quarter. On the second spot was Ophir Asset Management which amassed $4.7 million worth of shares. Schonfeld Strategic Advisors, Skylands Capital, and Citadel Investment Group were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Manatuck Hill Partners allocated the biggest weight to Fathom Holdings Inc. (NASDAQ:FTHM), around 2.97% of its 13F portfolio. Ophir Asset Management is also relatively very bullish on the stock, dishing out 0.95 percent of its 13F equity portfolio to FTHM.

Now, some big names were breaking ground themselves. Ophir Asset Management, managed by Steven Ng and Andrew Mitchell, created the largest position in Fathom Holdings Inc. (NASDAQ:FTHM). Ophir Asset Management had $4.7 million invested in the company at the end of the quarter.

Let’s also examine hedge fund activity in other stocks similar to Fathom Holdings Inc. (NASDAQ:FTHM). These stocks are Selecta Biosciences, Inc. (NASDAQ:SELB), Oppenheimer Holdings Inc. (NYSE:OPY), XBiotech Inc. (NASDAQ:XBIT), Arlo Technologies, Inc. (NYSE:ARLO), The First of Long Island Corporation (NASDAQ:FLIC), Boqii Holding Limited (NYSE:BQ), and REX American Resources Corp (NYSE:REX). This group of stocks’ market caps match FTHM’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 10 hedge funds with bullish positions and the average amount invested in these stocks was $28 million. That figure was $18 million in FTHM’s case. Arlo Technologies, Inc. (NYSE:ARLO) is the most popular stock in this table. On the other hand Boqii Holding Limited (NYSE:BQ) is the least popular one with only 2 bullish hedge fund positions. Fathom Holdings Inc. (NASDAQ:FTHM) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for FTHM is 48.5. 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. 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 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 19.3% in 2021 through June 25th and surpassed the market again by 4.8 percentage points. Unfortunately FTHM wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); FTHM investors were disappointed as the stock returned -1.4% since the end of March (through 6/25) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2021.

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