In this article we will take a look at whether hedge funds think Inovalon Holdings Inc (NASDAQ:INOV) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.
Is Inovalon Holdings Inc (NASDAQ:INOV) a buy right now? The best stock pickers were getting more optimistic. The number of long hedge fund bets went up by 3 recently. Inovalon Holdings Inc (NASDAQ:INOV) was in 20 hedge funds’ portfolios at the end of June. The all time high for this statistic is 22. Our calculations also showed that INOV isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).
If you’d ask most shareholders, hedge funds are viewed as unimportant, old investment vehicles of years past. While there are more than 8000 funds with their doors open today, We choose to focus on the leaders of this group, about 850 funds. These investment experts shepherd the majority of the smart money’s total capital, and by paying attention to their finest stock picks, Insider Monkey has discovered a few investment strategies that have historically defeated Mr. Market. Insider Monkey’s flagship short hedge fund strategy outstripped the S&P 500 short ETFs by around 20 percentage points per annum since its inception in March 2017. Also, our monthly newsletter’s portfolio of long stock picks returned 185.4% since March 2017 (through August 2021) and beat the S&P 500 Index by more than 79 percentage points. You can download a sample issue of this newsletter on our website.
Henrik Rhenman of Rhenman & Partners Asset Management
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, plant based food market is expected to explode 100-fold by 2050, so we are checking out this under-the-radar stock. We go through lists like the 10 best growth stocks to buy 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 take a gander at the fresh hedge fund action encompassing Inovalon Holdings Inc (NASDAQ:INOV).
Do Hedge Funds Think INOV Is A Good Stock To Buy Now?
Heading into the third quarter of 2021, a total of 20 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 18% from the first quarter of 2020. The graph below displays the number of hedge funds with bullish position in INOV over the last 24 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Pura Vida Investments was the largest shareholder of Inovalon Holdings Inc (NASDAQ:INOV), with a stake worth $54.7 million reported as of the end of June. Trailing Pura Vida Investments was Millennium Management, which amassed a stake valued at $25.1 million. Arrowstreet Capital, Rhenman & Partners Asset Management, and Pura Vida Investments 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 Samjo Capital allocated the biggest weight to Inovalon Holdings Inc (NASDAQ:INOV), around 7.04% of its 13F portfolio. Pura Vida Investments is also relatively very bullish on the stock, dishing out 1.7 percent of its 13F equity portfolio to INOV.
Consequently, key money managers were breaking ground themselves. Pura Vida Investments, managed by Efrem Kamen, initiated the largest call position in Inovalon Holdings Inc (NASDAQ:INOV). Pura Vida Investments had $10.9 million invested in the company at the end of the quarter. Renaissance Technologies also initiated a $0.8 million position during the quarter. The other funds with new positions in the stock are Michael Gelband’s ExodusPoint Capital, Ronald Hua’s Qtron Investments, and Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Inovalon Holdings Inc (NASDAQ:INOV) but similarly valued. We will take a look at Ashland Global Holdings Inc.. (NYSE:ASH), Enstar Group Ltd. (NASDAQ:ESGR), QTS Realty Trust Inc (NYSE:QTS), Gates Industrial Corporation plc (NYSE:GTES), Glacier Bancorp, Inc. (NASDAQ:GBCI), Inspire Medical Systems, Inc. (NYSE:INSP), and Flowserve Corporation (NYSE:FLS). This group of stocks’ market valuations are closest to INOV’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ASH | 28 | 933462 | -8 |
| ESGR | 11 | 495727 | 0 |
| QTS | 39 | 1285562 | 17 |
| GTES | 19 | 89195 | 1 |
| GBCI | 11 | 51205 | -5 |
| INSP | 32 | 544165 | 4 |
| FLS | 27 | 234192 | -2 |
| Average | 23.9 | 519073 | 1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 23.9 hedge funds with bullish positions and the average amount invested in these stocks was $519 million. That figure was $146 million in INOV’s case. QTS Realty Trust Inc (NYSE:QTS) is the most popular stock in this table. On the other hand Enstar Group Ltd. (NASDAQ:ESGR) is the least popular one with only 11 bullish hedge fund positions. Inovalon Holdings Inc (NASDAQ:INOV) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for INOV is 51.3. 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. 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 24% in 2021 through October 22nd and still beat the market by 1.6 percentage points. A small number of hedge funds were also right about betting on INOV as the stock returned 19.7% since the end of the second quarter (through 10/22) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.
