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ConforMIS, Inc. (CFMS) Is Burning These Hedge Funds

We at Insider Monkey have gone over 730 13F filings that hedge funds and prominent investors are required to file by the SEC The 13F filings show the funds’ and investors’ portfolio positions as of June 28th. In this article, we look at what those funds think of ConforMIS, Inc. (NASDAQ:CFMS) based on that data.

ConforMIS, Inc. (NASDAQ:CFMS) investors should be aware of an increase in support from the world’s most elite money managers in recent months. CFMS was in 7 hedge funds’ portfolios at the end of the second quarter of 2019. There were 4 hedge funds in our database with CFMS positions at the end of the previous quarter. Our calculations also showed that CFMS isn’t among the 30 most popular stocks among hedge funds (see the video below).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

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 market by 40 percentage points since May 2014 through May 30, 2019 (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.

John Overdeck of Two Sigma

Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let’s take a look at the new hedge fund action surrounding ConforMIS, Inc. (NASDAQ:CFMS).

How are hedge funds trading ConforMIS, Inc. (NASDAQ:CFMS)?

At Q2’s end, a total of 7 of the hedge funds tracked by Insider Monkey were long this stock, a change of 75% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards CFMS over the last 16 quarters. With hedge funds’ sentiment swirling, there exists a select group of key hedge fund managers who were adding to their stakes significantly (or already accumulated large positions).

No of Hedge Funds with CFMS Positions

Of the funds tracked by Insider Monkey, Constantinos J. Christofilis’s Archon Capital Management has the number one position in ConforMIS, Inc. (NASDAQ:CFMS), worth close to $35.6 million, corresponding to 6.5% of its total 13F portfolio. Sitting at the No. 2 spot is Renaissance Technologies holding a $23.2 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Remaining members of the smart money that are bullish contain Israel Englander’s Millennium Management, Joseph Edelman’s Perceptive Advisors and John Overdeck and David Siegel’s Two Sigma Advisors.

Now, specific money managers were breaking ground themselves. Perceptive Advisors, managed by Joseph Edelman, established the largest position in ConforMIS, Inc. (NASDAQ:CFMS). Perceptive Advisors had $0.4 million invested in the company at the end of the quarter. Chuck Royce’s Royce & Associates also initiated a $0.1 million position during the quarter. The only other fund with a brand new CFMS position is Andrew Weiss’s Weiss Asset Management.

Let’s now take a look at hedge fund activity in other stocks similar to ConforMIS, Inc. (NASDAQ:CFMS). These stocks are OptiNose, Inc. (NASDAQ:OPTN), North American Construction Group Ltd. (NYSE:NOA), L.B. Foster Company (NASDAQ:FSTR), and TuanChe Limited (NASDAQ:TC). This group of stocks’ market values are similar to CFMS’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
OPTN 6 7127 3
NOA 9 46970 1
FSTR 15 68558 1
TC 2 137 1
Average 8 30698 1.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 8 hedge funds with bullish positions and the average amount invested in these stocks was $31 million. That figure was $62 million in CFMS’s case. L.B. Foster Company (NASDAQ:FSTR) is the most popular stock in this table. On the other hand TuanChe Limited (NASDAQ:TC) is the least popular one with only 2 bullish hedge fund positions. ConforMIS, Inc. (NASDAQ:CFMS) 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. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately CFMS wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); CFMS investors were disappointed as the stock returned -57.3% during the third quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far in 2019.

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

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