Out of thousands of stocks that are currently traded on the market, it is difficult to identify those that will really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of nearly 817 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has the potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about Fonar Corporation (NASDAQ:FONR).
Is Fonar Corporation (NASDAQ:FONR) a buy right now? Investors who are in the know were selling. The number of bullish hedge fund bets were cut by 2 recently. Fonar Corporation (NASDAQ:FONR) was in 4 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistics is 9. Our calculations also showed that FONR isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks). There were 6 hedge funds in our database with FONR holdings at the end of June.
Video: 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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 66 percentage points since March 2017 (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 13% through November 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
David Harding of Winton Capital Management
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. With all of this in mind we’re going to take a look at the fresh hedge fund action surrounding Fonar Corporation (NASDAQ:FONR).
How have hedgies been trading Fonar Corporation (NASDAQ:FONR)?
At third quarter’s end, 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 2020. By comparison, 9 hedge funds held shares or bullish call options in FONR a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Renaissance Technologies, managed by Jim Simons (founder), holds the number one position in Fonar Corporation (NASDAQ:FONR). Renaissance Technologies has a $9.5 million position in the stock, comprising less than 0.1%% of its 13F portfolio. Sitting at the No. 2 spot is Winton Capital Management, managed by David Harding, which holds a $1.2 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Remaining hedge funds and institutional investors that hold long positions encompass Noam Gottesman’s GLG Partners, Gavin Saitowitz and Cisco J. del Valle’s Prelude Capital (previously Springbok Capital) and . In terms of the portfolio weights assigned to each position Winton Capital Management allocated the biggest weight to Fonar Corporation (NASDAQ:FONR), around 0.04% of its 13F portfolio. Renaissance Technologies is also relatively very bullish on the stock, dishing out 0.01 percent of its 13F equity portfolio to FONR.
Because Fonar Corporation (NASDAQ:FONR) has witnessed declining sentiment from the smart money, it’s safe to say that there lies a certain “tier” of hedgies that elected to cut their positions entirely by the end of the third quarter. Intriguingly, John Overdeck and David Siegel’s Two Sigma Advisors sold off the biggest investment of the 750 funds followed by Insider Monkey, comprising about $0.4 million in stock. D. E. Shaw’s fund, D E Shaw, also cut its stock, about $0.2 million worth. These moves are important to note, as aggregate hedge fund interest dropped by 2 funds by the end of the third quarter.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Fonar Corporation (NASDAQ:FONR) but similarly valued. We will take a look at BELLUS Health Inc. (NASDAQ:BLU), Exagen Inc. (NASDAQ:XGN), Bassett Furniture Industries Inc. (NASDAQ:BSET), BCB Bancorp, Inc. (NASDAQ:BCBP), Infrastructure and Energy Alternatives, Inc. (NASDAQ:IEA), Lantronix Inc (NASDAQ:LTRX), and Ocean Bio-Chem, Inc. (NASDAQ:OBCI). This group of stocks’ market valuations are closest to FONR’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| BLU | 8 | 27150 | -9 |
| XGN | 1 | 1 | 0 |
| BSET | 5 | 23360 | -4 |
| BCBP | 3 | 12669 | -1 |
| IEA | 7 | 16703 | 0 |
| LTRX | 4 | 5861 | 0 |
| OBCI | 2 | 4284 | 1 |
| Average | 4.3 | 12861 | -1.9 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 4.3 hedge funds with bullish positions and the average amount invested in these stocks was $13 million. That figure was $11 million in FONR’s case. BELLUS Health Inc. (NASDAQ:BLU) is the most popular stock in this table. On the other hand Exagen Inc. (NASDAQ:XGN) is the least popular one with only 1 bullish hedge fund positions. Fonar Corporation (NASDAQ:FONR) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for FONR is 37.8. 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. 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 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 30.7% in 2020 through November 27th and surpassed the market again by 16.1 percentage points. Unfortunately FONR wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); FONR investors were disappointed as the stock returned -7.6% since the end of September (through 11/27) 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 most of these stocks already outperformed the market in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.
