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Digirad Corporation (DRAD): Are Hedge Funds Right About This Stock?

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 752 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of September 30th. In this article we look at what those investors think of Digirad Corporation (NASDAQ:DRAD).

Digirad Corporation (NASDAQ:DRAD) shares haven’t seen a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 4 hedge funds’ portfolios at the end of the third quarter of 2019. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Trillium Therapeutics Inc. (NASDAQ:TRIL), Rexahn Pharmaceuticals, Inc. (NASDAQ:REXN), and NanoViricides Inc (NYSE:NNVC) to gather more data points. Our calculations also showed that DRAD 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.

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 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 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.

RENAISSANCE TECHNOLOGIES

Jim Simons of Renaissance Technologies

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 let’s take a peek at the key hedge fund action encompassing Digirad Corporation (NASDAQ:DRAD).

Hedge fund activity in Digirad Corporation (NASDAQ:DRAD)

At the end of the third quarter, a total of 4 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards DRAD over the last 17 quarters. With hedge funds’ sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were boosting their stakes considerably (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, J. Carlo Cannell’s Cannell Capital has the number one position in Digirad Corporation (NASDAQ:DRAD), worth close to $1 million, corresponding to 0.3% of its total 13F portfolio. The second most bullish fund manager is Renaissance Technologies holding a $0.4 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Remaining hedge funds and institutional investors that hold long positions consist of Frederick DiSanto’s Ancora Advisors, John W. Rogers’s Ariel Investments and . In terms of the portfolio weights assigned to each position Cannell Capital allocated the biggest weight to Digirad Corporation (NASDAQ:DRAD), around 0.32% of its 13F portfolio. Ancora Advisors is also relatively very bullish on the stock, setting aside 0.01 percent of its 13F equity portfolio to DRAD.

Earlier we told you that the aggregate hedge fund interest in the stock was unchanged and we view this as a negative development. Even though there weren’t any hedge funds dumping their holdings during the third quarter, there weren’t any hedge funds initiating brand new positions. This indicates that hedge funds, at the very best, perceive this stock as dead money and they haven’t identified any viable catalysts that can attract investor attention.

Let’s also examine hedge fund activity in other stocks similar to Digirad Corporation (NASDAQ:DRAD). We will take a look at Trillium Therapeutics Inc. (NASDAQ:TRIL), Rexahn Pharmaceuticals, Inc. (NASDAQ:REXN), NanoViricides Inc (NYSE:NNVC), and CTI Industries Corporation (NASDAQ:CTIB). This group of stocks’ market values match DRAD’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
TRIL 4 879 1
REXN 1 224 0
NNVC 1 119 0
CTIB 1 25 0
Average 1.75 312 0.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 1.75 hedge funds with bullish positions and the average amount invested in these stocks was $0 million. That figure was $2 million in DRAD’s case. Trillium Therapeutics Inc. (NASDAQ:TRIL) is the most popular stock in this table. On the other hand Rexahn Pharmaceuticals, Inc. (NASDAQ:REXN) is the least popular one with only 1 bullish hedge fund positions. Digirad Corporation (NASDAQ:DRAD) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but 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 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately DRAD wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on DRAD were disappointed as the stock returned -30.1% during the fourth quarter (through the end of November) 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 this year.

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

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