Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that’s why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to smartest analysts and expensive data/information sources that individual investors can’t match. So should one consider investing in Aware, Inc. (NASDAQ:AWRE)? The smart money sentiment can provide an answer to this question.
Aware, Inc. (NASDAQ:AWRE) shares haven’t seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 3 hedge funds’ portfolios at the end of September. Our calculations also showed that AWRE 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). At the end of this article we will also compare AWRE to other stocks including Anixa Biosciences, Inc. (NASDAQ:ANIX), Citius Pharmaceuticals, Inc. (NASDAQ:CTXR), and Crown Crafts, Inc. (NASDAQ:CRWS) to get a better sense of its popularity.
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.
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. 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 website. With all of this in mind let’s review the recent hedge fund action regarding Aware, Inc. (NASDAQ:AWRE).
How have hedgies been trading Aware, Inc. (NASDAQ:AWRE)?
At the end of September, a total of 3 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the second quarter of 2020. Below, you can check out the change in hedge fund sentiment towards AWRE over the last 21 quarters. With hedgies’ positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).
Among these funds, DG Capital Management held the most valuable stake in Aware, Inc. (NASDAQ:AWRE), which was worth $5 million at the end of the third quarter. On the second spot was Renaissance Technologies which amassed $2.4 million worth of shares. GMT Capital was 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 DG Capital Management allocated the biggest weight to Aware, Inc. (NASDAQ:AWRE), around 3% of its 13F portfolio. GMT Capital is also relatively very bullish on the stock, earmarking 0.0048 percent of its 13F equity portfolio to AWRE.
Earlier we told you that the aggregate hedge fund interest in the stock was unchanged and we view this as a negative development. Even though there weren’t any hedge funds dumping their holdings during the third quarter, there weren’t any hedge funds initiating brand new positions. This indicates that hedge funds, at the very best, perceive this stock as dead money and they haven’t identified any viable catalysts that can attract investor attention.
Let’s go over hedge fund activity in other stocks similar to Aware, Inc. (NASDAQ:AWRE). These stocks are Anixa Biosciences, Inc. (NASDAQ:ANIX), Citius Pharmaceuticals, Inc. (NASDAQ:CTXR), Crown Crafts, Inc. (NASDAQ:CRWS), VAALCO Energy, Inc. (NYSE:EGY), AstroNova, Inc. (NASDAQ:ALOT), Proteostasis Therapeutics, Inc. (NASDAQ:PTI), and Fauquier Bankshares, Inc. (NASDAQ:FBSS). This group of stocks’ market valuations match AWRE’s market valuation.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 4.4 hedge funds with bullish positions and the average amount invested in these stocks was $5 million. That figure was $8 million in AWRE’s case. AstroNova, Inc. (NASDAQ:ALOT) is the most popular stock in this table. On the other hand Anixa Biosciences, Inc. (NASDAQ:ANIX) is the least popular one with only 1 bullish hedge fund positions. Aware, Inc. (NASDAQ:AWRE) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for AWRE is 37.3. 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 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 28.1% in 2020 through November 23rd and still beat the market by 15.4 percentage points. A small number of hedge funds were also right about betting on AWRE as the stock returned 11.5% since the end of the third quarter (through 11/23) and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.