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AudioCodes Ltd. (AUDC): Hedge Funds Are Nibbling

How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding AudioCodes Ltd. (NASDAQ:AUDC) and determine whether hedge funds had an edge regarding this stock.

Is AudioCodes Ltd. (NASDAQ:AUDC) a healthy stock for your portfolio? Hedge funds were becoming more confident. The number of bullish hedge fund positions increased by 1 in recent months. Our calculations also showed that AUDC isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks). AUDC was in 10 hedge funds’ portfolios at the end of the first quarter of 2020. There were 9 hedge funds in our database with AUDC positions at the end of the previous quarter.

Video: Watch our video about the top 5 most popular hedge fund stocks.

To the average investor there are numerous gauges stock market investors have at their disposal to value publicly traded companies. Some of the most under-the-radar gauges are hedge fund and insider trading signals. Our researchers have shown that, historically, those who follow the top picks of the best investment managers can outpace their index-focused peers by a very impressive amount (see the details here).

NAVELLIER & ASSOCIATES

Louis Navellier of Navellier & Associates

At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a “weekend trading strategy”, so we look into his strategy’s picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller’s investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we’re going to check out the latest hedge fund action encompassing AudioCodes Ltd. (NASDAQ:AUDC).

What have hedge funds been doing with AudioCodes Ltd. (NASDAQ:AUDC)?

Heading into the second quarter of 2020, a total of 10 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 11% from the fourth quarter of 2019. Below, you can check out the change in hedge fund sentiment towards AUDC over the last 18 quarters. With hedge funds’ sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were adding to their stakes meaningfully (or already accumulated large positions).

According to Insider Monkey’s hedge fund database, Douglas T. Granat’s Trigran Investments has the largest position in AudioCodes Ltd. (NASDAQ:AUDC), worth close to $17.2 million, amounting to 3.8% of its total 13F portfolio. The second largest stake is held by Sphera Global Healthcare Fund, managed by Doron Breen and Mori Arkin, which holds a $4.9 million position; 0.6% of its 13F portfolio is allocated to the company. Remaining professional money managers that are bullish encompass Israel Englander’s Millennium Management, Louis Navellier’s Navellier & Associates and Richard Mashaal’s Rima Senvest Management. In terms of the portfolio weights assigned to each position Trigran Investments allocated the biggest weight to AudioCodes Ltd. (NASDAQ:AUDC), around 3.78% of its 13F portfolio. Navellier & Associates is also relatively very bullish on the stock, setting aside 0.94 percent of its 13F equity portfolio to AUDC.

With a general bullishness amongst the heavyweights, some big names have been driving this bullishness. Trigran Investments, managed by Douglas T. Granat, established the largest position in AudioCodes Ltd. (NASDAQ:AUDC). Trigran Investments had $17.2 million invested in the company at the end of the quarter. Doron Breen and Mori Arkin’s Sphera Global Healthcare Fund also made a $4.9 million investment in the stock during the quarter. The following funds were also among the new AUDC investors: Ken Griffin’s Citadel Investment Group and Matthew Hulsizer’s PEAK6 Capital Management.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as AudioCodes Ltd. (NASDAQ:AUDC) but similarly valued. These stocks are EverQuote, Inc. (NASDAQ:EVER), Veritex Holdings Inc (NASDAQ:VBTX), INMODE LTD. (NASDAQ:INMD), and Homology Medicines, Inc. (NASDAQ:FIXX). This group of stocks’ market values are closest to AUDC’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
EVER 23 110730 4
VBTX 9 34975 -1
INMD 11 59841 4
FIXX 15 102298 6
Average 14.5 76961 3.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 14.5 hedge funds with bullish positions and the average amount invested in these stocks was $77 million. That figure was $37 million in AUDC’s case. EverQuote, Inc. (NASDAQ:EVER) is the most popular stock in this table. On the other hand Veritex Holdings Inc (NASDAQ:VBTX) is the least popular one with only 9 bullish hedge fund positions. AudioCodes Ltd. (NASDAQ:AUDC) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 12.3% in 2020 through June 30th and still beat the market by 15.5 percentage points. A small number of hedge funds were also right about betting on AUDC as the stock returned 33.1% during the second quarter and outperformed the market by an even larger margin.

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