Hedge Funds Have Never Been This Bullish On Sharps Compliance Corp. (SMED)

In this article you are going to find out whether hedge funds think Sharps Compliance Corp. (NASDAQ:SMED) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It’s not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.

Is Sharps Compliance Corp. (NASDAQ:SMED) a bargain? The smart money is becoming hopeful. The number of bullish hedge fund bets inched up by 4 recently. Our calculations also showed that SMED 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). SMED was in 5 hedge funds’ portfolios at the end of the first quarter of 2020. There were 1 hedge funds in our database with SMED holdings at the end of the previous quarter.

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

If you’d ask most shareholders, hedge funds are perceived as underperforming, old financial vehicles of yesteryear. While there are over 8000 funds trading at present, Our researchers hone in on the leaders of this group, approximately 850 funds. Most estimates calculate that this group of people administer the majority of the smart money’s total capital, and by keeping track of their unrivaled equity investments, Insider Monkey has spotted numerous investment strategies that have historically outpaced the broader indices. Insider Monkey’s flagship short hedge fund strategy beat the S&P 500 short ETFs by around 20 percentage points per year since its inception in March 2017. Our portfolio of short stocks lost 36% since February 2017 (through May 18th) even though the market was up 30% during the same period. We just shared a list of 8 short targets in our latest quarterly update .


Israel Englander of Millennium Management

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 let’s check out the latest hedge fund action surrounding Sharps Compliance Corp. (NASDAQ:SMED).

How are hedge funds trading Sharps Compliance Corp. (NASDAQ:SMED)?

At Q1’s end, a total of 5 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 400% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards SMED over the last 18 quarters. With hedgies’ capital changing hands, there exists an “upper tier” of notable hedge fund managers who were adding to their stakes considerably (or already accumulated large positions).

The largest stake in Sharps Compliance Corp. (NASDAQ:SMED) was held by Renaissance Technologies, which reported holding $4.2 million worth of stock at the end of September. It was followed by G2 Investment Partners Management with a $2.8 million position. Other investors bullish on the company included Royce & Associates, Algert Coldiron Investors, and Millennium Management. In terms of the portfolio weights assigned to each position G2 Investment Partners Management allocated the biggest weight to Sharps Compliance Corp. (NASDAQ:SMED), around 0.93% of its 13F portfolio. Algert Coldiron Investors is also relatively very bullish on the stock, setting aside 0.06 percent of its 13F equity portfolio to SMED.

With a general bullishness amongst the heavyweights, specific money managers have been driving this bullishness. G2 Investment Partners Management, managed by Josh Goldberg, assembled the most valuable position in Sharps Compliance Corp. (NASDAQ:SMED). G2 Investment Partners Management had $2.8 million invested in the company at the end of the quarter. Chuck Royce’s Royce & Associates also made a $1 million investment in the stock during the quarter. The following funds were also among the new SMED investors: Peter Algert and Kevin Coldiron’s Algert Coldiron Investors and Israel Englander’s Millennium Management.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Sharps Compliance Corp. (NASDAQ:SMED) but similarly valued. These stocks are Exicure, Inc. (NASDAQ:XCUR), The Community Financial Corporation (NASDAQ:TCFC), Saratoga Investment Corp (NYSE:SAR), and Hamilton Beach Brands Holding Company (NYSE:HBB). This group of stocks’ market caps are closest to SMED’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
XCUR 11 26112 0
TCFC 3 15041 0
SAR 5 2482 -1
HBB 7 1843 1
Average 6.5 11370 0

View table here if you experience formatting issues.

As you can see these stocks had an average of 6.5 hedge funds with bullish positions and the average amount invested in these stocks was $11 million. That figure was $8 million in SMED’s case. Exicure, Inc. (NASDAQ:XCUR) is the most popular stock in this table. On the other hand The Community Financial Corporation (NASDAQ:TCFC) is the least popular one with only 3 bullish hedge fund positions. Sharps Compliance Corp. (NASDAQ:SMED) is not the least popular stock in this group but hedge fund interest is still below average. 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 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 8.3% in 2020 through the end of May and surpassed the market by 13.2 percentage points. Unfortunately SMED wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); SMED investors were disappointed as the stock returned -10.6% during the second quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 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.