Based on the fact that hedge funds have collectively under-performed the market for several years, it would be easy to assume that their stock picks simply aren’t very good. However, our research shows this not to be the case. In fact, when it comes to their very top picks collectively, they show a strong ability to pick winning stocks. Between November 1, 2014 and October 30 of this year, less than 49% of the stocks in the S&P 500 beat the market. However, hedge funds’ top 30 stock picks from the index had a much higher success rate than this, at 63%. The returns from these 30 stocks also easily bested the broader market, at 9.5% compared to 5.2%, despite there being a few duds in there like Micron and Anadarko (even their collective wisdom isn’t perfect). The results show that there is plenty of merit to imitating the collective wisdom of top investors.
Natural Health Trends Corp. (NASDAQ:NHTC) was in 13 hedge funds’ portfolios at the end of the third quarter of 2015. NHTC investors should be aware of an increase in hedge fund interest lately. There were 9 hedge funds in our database with NHTC holdings at the end of the previous quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity, but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Calix Inc (NYSE:CALX), Waterstone Financial, Inc. (NASDAQ:WSBF), and Spectrum Pharmaceuticals, Inc. (NASDAQ:SPPI) to gather more data points.
In the financial world there are plenty of gauges investors have at their disposal to assess publicly traded companies. A couple of the best gauges are hedge fund and insider trading indicators. We have shown that, historically, those who follow the best picks of the elite money managers can outclass their index-focused peers by a significant amount (see the details here).
Now, we’re going to go over the recent action surrounding Natural Health Trends Corp. (NASDAQ:NHTC).
What have hedge funds been doing with Natural Health Trends Corp. (NASDAQ:NHTC)?
Heading into Q4, a total of 13 of the hedge funds tracked by Insider Monkey held long positions in this stock, a surge of 44% from the second quarter. With the smart money’s positions undergoing their usual ebb and flow, there exists an “upper tier” of key hedge fund managers who were upping their holdings significantly (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Renaissance Technologies, managed by Jim Simons, holds the number one position in Natural Health Trends Corp. (NASDAQ:NHTC). The fund reportedly holds a $14.6 million position in the stock, comprising less than 0.1% of its 13F portfolio. Coming in second is Manatuck Hill Partners, led by Mark Broach, holding a $12.1 million position; 5.2% of its 13F portfolio is allocated to the stock. Other members of the smart money that are bullish encompass Cliff Asness’s AQR Capital Management, Joseph A. Jolson’s Harvest Capital Strategies and Joel Greenblatt’s Gotham Asset Management.
As one would reasonably expect, key money managers were leading the bulls’ herd. Gotham Asset Management, managed by Joel Greenblatt, initiated the biggest position in Natural Health Trends Corp. (NASDAQ:NHTC). The fund had $0.8 million invested in the company at the end of the quarter. Peter Algert and Kevin Coldiron’s Algert Coldiron Investors also initiated a $0.7 million position during the quarter. The other funds with new positions in the stock are Glenn Russell Dubin’s Highbridge Capital Management, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, and Gavin Saitowitz and Cisco J. del Valle’s Springbok Capital.
Let’s go over hedge fund activity in other stocks similar to Natural Health Trends Corp. (NASDAQ:NHTC). These stocks are Calix Inc (NYSE:CALX), Waterstone Financial, Inc. (NASDAQ:WSBF), Spectrum Pharmaceuticals, Inc. (NASDAQ:SPPI), and Entercom Communications Corp. (NYSE:ETM). This group of stocks’ market values resemble NHTC’s market value.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
As you can see these stocks had an average of 14 hedge funds with bullish positions and the average amount invested in these stocks was $48 million. That figure was $38 million in NHTC’s case. Calix Inc (NYSE:CALX) is the most popular stock in this table. On the other hand Waterstone Financial, Inc. (NASDAQ:WSBF) is the least popular one with only 10 bullish hedge fund positions. Natural Health Trends Corp. (NASDAQ:NHTC) 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. In this regard CALX might be a better candidate to consider a long position.