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Hedge Funds Cashing Out Of GenMark Diagnostics, Inc (GNMK)

We at Insider Monkey have gone over 821 13F filings that hedge funds and prominent investors are required to file by the SEC The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, near the height of the coronavirus market crash. In this article, we look at what those funds think of GenMark Diagnostics, Inc (NASDAQ:GNMK) based on that data.

Is GenMark Diagnostics, Inc (NASDAQ:GNMK) undervalued? The smart money is becoming less hopeful. The number of bullish hedge fund positions dropped by 3 recently. Our calculations also showed that GNMK 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). GNMK was in 14 hedge funds’ portfolios at the end of the first quarter of 2020. There were 17 hedge funds in our database with GNMK holdings at the end of the previous quarter.

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 58 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.

Kamran Moghtaderi of Eversept Partners

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, blockchain technology’s influence will go beyond online payments. So, we are checking out this futurist’s moonshot opportunities in tech stocks. We interview hedge fund managers and ask them about their best ideas. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind we’re going to take a look at the fresh hedge fund action regarding GenMark Diagnostics, Inc (NASDAQ:GNMK).

What have hedge funds been doing with GenMark Diagnostics, Inc (NASDAQ:GNMK)?

Heading into the second quarter of 2020, a total of 14 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -18% from the previous quarter. The graph below displays the number of hedge funds with bullish position in GNMK over the last 18 quarters. With hedgies’ positions undergoing their usual ebb and flow, there exists an “upper tier” of notable hedge fund managers who were boosting their stakes meaningfully (or already accumulated large positions).

Among these funds, Cadian Capital held the most valuable stake in GenMark Diagnostics, Inc (NASDAQ:GNMK), which was worth $14.4 million at the end of the third quarter. On the second spot was Casdin Capital which amassed $13.9 million worth of shares. Portolan Capital Management, Millennium Management, and Renaissance Technologies 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 Casdin Capital allocated the biggest weight to GenMark Diagnostics, Inc (NASDAQ:GNMK), around 1.47% of its 13F portfolio. Lyon Street Capital is also relatively very bullish on the stock, setting aside 1.26 percent of its 13F equity portfolio to GNMK.

Due to the fact that GenMark Diagnostics, Inc (NASDAQ:GNMK) has faced a decline in interest from the smart money, logic holds that there is a sect of fund managers that slashed their full holdings heading into Q4. It’s worth mentioning that Anand Parekh’s Alyeska Investment Group sold off the largest position of the “upper crust” of funds tracked by Insider Monkey, totaling about $2.9 million in stock, and Steve Cohen’s Point72 Asset Management was right behind this move, as the fund dumped about $1.7 million worth. These transactions are important to note, as total hedge fund interest dropped by 3 funds heading into Q4.

Let’s also examine hedge fund activity in other stocks similar to GenMark Diagnostics, Inc (NASDAQ:GNMK). These stocks are Navigator Holdings Ltd (NYSE:NVGS), Silver Spike Acquisition Corp. (NASDAQ:SSPKU), ADMA Biologics Inc (NASDAQ:ADMA), and Paysign, Inc. (NASDAQ:PAYS). All of these stocks’ market caps resemble GNMK’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
NVGS 13 18880 -3
SSPKU 12 35047 2
ADMA 19 86590 7
PAYS 11 14615 -4
Average 13.75 38783 0.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 13.75 hedge funds with bullish positions and the average amount invested in these stocks was $39 million. That figure was $44 million in GNMK’s case. ADMA Biologics Inc (NASDAQ:ADMA) is the most popular stock in this table. On the other hand Paysign, Inc. (NASDAQ:PAYS) is the least popular one with only 11 bullish hedge fund positions. GenMark Diagnostics, Inc (NASDAQ:GNMK) is not the most popular stock in this group but hedge fund interest is still above average. 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 gained 13.3% in 2020 through June 25th but still beat the market by 16.8 percentage points. Hedge funds were also right about betting on GNMK as the stock returned 256.8% in Q2 (through June 25th) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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