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Hedge Funds Are Nibbling On Helius Medical Technologies, Inc. (HSDT)

In this article we will take a look at whether hedge funds think Helius Medical Technologies, Inc. (NASDAQ:HSDT) 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.

Helius Medical Technologies, Inc. (NASDAQ:HSDT) shareholders have witnessed an increase in activity from the world’s largest hedge funds of late. Our calculations also showed that HSDT isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 S&P 500 ETFs by more than 51 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 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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.

Ken Griffin CITADEL INVESTMENT GROUP

Ken Griffin of Citadel Investment Group

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out stocks recommended/scorned by legendary Bill Miller. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we’re going to take a look at the new hedge fund action regarding Helius Medical Technologies, Inc. (NASDAQ:HSDT).

What have hedge funds been doing with Helius Medical Technologies, Inc. (NASDAQ:HSDT)?

At the end of the first quarter, a total of 5 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 150% from one quarter earlier. On the other hand, there were a total of 1 hedge funds with a bullish position in HSDT a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in Helius Medical Technologies, Inc. (NASDAQ:HSDT) was held by Armistice Capital, which reported holding $0.6 million worth of stock at the end of September. It was followed by Sabby Capital with a $0.2 million position. Other investors bullish on the company included Renaissance Technologies, Millennium Management, and Citadel Investment Group. In terms of the portfolio weights assigned to each position Sabby Capital allocated the biggest weight to Helius Medical Technologies, Inc. (NASDAQ:HSDT), around 0.1% of its 13F portfolio. Armistice Capital is also relatively very bullish on the stock, designating 0.04 percent of its 13F equity portfolio to HSDT.

Consequently, some big names have been driving this bullishness. Armistice Capital, managed by Steven Boyd, created the biggest position in Helius Medical Technologies, Inc. (NASDAQ:HSDT). Armistice Capital had $0.6 million invested in the company at the end of the quarter. Hal Mintz’s Sabby Capital also initiated a $0.2 million position during the quarter. The only other fund with a new position in the stock is Ken Griffin’s Citadel Investment Group.

Let’s now review hedge fund activity in other stocks similar to Helius Medical Technologies, Inc. (NASDAQ:HSDT). We will take a look at Harte-Hanks, Inc. (NYSE:HHS), Trio-Tech International (NYSE:TRT), InnSuites Hospitality Trust (NYSE:IHT), and Hudson Capital Inc. (NASDAQ:CIFS). All of these stocks’ market caps match HSDT’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
HHS 2 1222 0
TRT 1 687 0
IHT 2 28 1
CIFS 1 377 0
Average 1.5 579 0.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 1.5 hedge funds with bullish positions and the average amount invested in these stocks was $1 million. That figure was $1 million in HSDT’s case. Harte-Hanks, Inc. (NYSE:HHS) is the most popular stock in this table. On the other hand Trio-Tech International (NYSE:TRT) is the least popular one with only 1 bullish hedge fund positions. Compared to these stocks Helius Medical Technologies, Inc. (NASDAQ:HSDT) is more popular among hedge funds. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks returned 8.3% in 2020 through the end of May but still managed to beat the market by 13.2 percentage points. Hedge funds were also right about betting on HSDT as the stock returned 49.7% so far in Q2 (through the end of May) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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