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Did Hedge Funds Drop The Ball On Akerna Corp. (KERN) ?

We are still in an overall bull market and many stocks that smart money investors were piling into surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Hedge funds’ top 3 stock picks returned 41.7% this year and beat the S&P 500 ETFs by 14 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like Akerna Corp. (NASDAQ:KERN).

Akerna Corp. (NASDAQ:KERN) has experienced an increase in enthusiasm from smart money of late. KERN was in 4 hedge funds’ portfolios at the end of September. There were 3 hedge funds in our database with KERN holdings at the end of the previous quarter. Our calculations also showed that KERN isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Sander Gerber of Hudson Bay Capital

We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius’ weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock already gained 20 percent. With all of this in mind we’re going to take a look at the latest hedge fund action surrounding Akerna Corp. (NASDAQ:KERN).

What have hedge funds been doing with Akerna Corp. (NASDAQ:KERN)?

At the end of the third quarter, a total of 4 of the hedge funds tracked by Insider Monkey were long this stock, a change of 33% from the second quarter of 2019. Below, you can check out the change in hedge fund sentiment towards KERN over the last 17 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is KERN A Good Stock To Buy?

When looking at the institutional investors followed by Insider Monkey, John A. Levin’s Levin Capital Strategies has the largest position in Akerna Corp. (NASDAQ:KERN), worth close to $0.1 million, corresponding to less than 0.1%% of its total 13F portfolio. Sitting at the No. 2 spot is Sander Gerber of Hudson Bay Capital Management, with a $0.1 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Remaining hedge funds and institutional investors that are bullish encompass Ari Zweiman’s 683 Capital Partners, Jack Ripsteen’s Potrero Capital Research and . In terms of the portfolio weights assigned to each position Potrero Capital Research allocated the biggest weight to Akerna Corp. (NASDAQ:KERN), around 0.01% of its 13F portfolio. Levin Capital Strategies is also relatively very bullish on the stock, earmarking 0.01 percent of its 13F equity portfolio to KERN.

As one would reasonably expect, key money managers have jumped into Akerna Corp. (NASDAQ:KERN) headfirst. Potrero Capital Research, managed by Jack Ripsteen, created the biggest position in Akerna Corp. (NASDAQ:KERN). Potrero Capital Research had $0 million invested in the company at the end of the quarter. John A. Levin’s Levin Capital Strategies also made a $0 million investment in the stock during the quarter.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Akerna Corp. (NASDAQ:KERN) but similarly valued. These stocks are China Automotive Systems, Inc. (NASDAQ:CAAS), InflaRx N.V. (NASDAQ:IFRX), Pathfinder Bancorp, Inc. (NASDAQ:PBHC), and Eyenovia, Inc. (NASDAQ:EYEN). This group of stocks’ market values resemble KERN’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CAAS 1 714 0
IFRX 5 6029 1
PBHC 1 3459 0
EYEN 2 795 0
Average 2.25 2749 0.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 2.25 hedge funds with bullish positions and the average amount invested in these stocks was $3 million. That figure was $0 million in KERN’s case. InflaRx N.V. (NASDAQ:IFRX) is the most popular stock in this table. On the other hand China Automotive Systems, Inc. (NASDAQ:CAAS) is the least popular one with only 1 bullish hedge fund positions. Akerna Corp. (NASDAQ:KERN) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Hedge funds were also right about betting on KERN as the stock returned 25.8% during the fourth quarter (through the end of November) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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

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