Amid an overall bull market, many stocks that smart money investors were collectively bullish on surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Our research shows that most of the stocks that smart money likes historically generate strong risk-adjusted returns. That’s why we weren’t surprised when hedge funds’ top 20 large-cap stock picks generated a return of 37.4% through the end of November and outperformed the broader market benchmark by 9.9 percentage points.This is why following the smart money sentiment is a useful tool at identifying the next stock to invest in.
ViewRay, Inc. (NASDAQ:VRAY) has seen an increase in hedge fund interest in recent months. Our calculations also showed that VRAY isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 91% since May 2014 and outperformed the Russell 2000 ETFs by nearly 40 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Kevin Kotler of Broadfin Capital
We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius’ weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock already gained 20 percent. Now we’re going to view the key hedge fund action surrounding ViewRay, Inc. (NASDAQ:VRAY).
What does smart money think about ViewRay, Inc. (NASDAQ:VRAY)?
Heading into the fourth quarter of 2019, a total of 20 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 18% from the previous quarter. On the other hand, there were a total of 23 hedge funds with a bullish position in VRAY a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Park West Asset Management held the most valuable stake in ViewRay, Inc. (NASDAQ:VRAY), which was worth $27.7 million at the end of the third quarter. On the second spot was Puissance Capital Management which amassed $19.8 million worth of shares. Healthcor Management, Broadfin Capital, and Perceptive Advisors 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 Puissance Capital Management allocated the biggest weight to ViewRay, Inc. (NASDAQ:VRAY), around 44.27% of its 13F portfolio. Broadfin Capital is also relatively very bullish on the stock, dishing out 1.61 percent of its 13F equity portfolio to VRAY.
Now, specific money managers were breaking ground themselves. Lansdowne Partners, managed by Alex Snow, established the most valuable position in ViewRay, Inc. (NASDAQ:VRAY). Lansdowne Partners had $6.9 million invested in the company at the end of the quarter. James E. Flynn’s Deerfield Management also initiated a $1.1 million position during the quarter. The following funds were also among the new VRAY investors: Dmitry Balyasny’s Balyasny Asset Management, Donald Sussman’s Paloma Partners, and David Harding’s Winton Capital Management.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as ViewRay, Inc. (NASDAQ:VRAY) but similarly valued. These stocks are Solar Senior Capital Ltd (NASDAQ:SUNS), Parker Drilling Company (NYSE:PKD), 22nd Century Group, Inc (NYSE:XXII), and Pivotal Investment Corporation II (NYSE:PIC). This group of stocks’ market caps are similar to VRAY’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SUNS | 3 | 1058 | 2 |
| PKD | 4 | 91367 | 0 |
| XXII | 2 | 227 | -1 |
| PIC | 15 | 50569 | 15 |
| Average | 6 | 35805 | 4 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 6 hedge funds with bullish positions and the average amount invested in these stocks was $36 million. That figure was $104 million in VRAY’s case. Pivotal Investment Corporation II (NYSE:PIC) is the most popular stock in this table. On the other hand 22nd Century Group, Inc (NYSE:XXII) is the least popular one with only 2 bullish hedge fund positions. Compared to these stocks ViewRay, Inc. (NASDAQ:VRAY) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Hedge funds were also right about betting on VRAY as the stock returned 14.5% during the first two months of Q4 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.
Disclosure: None. This article was originally published at Insider Monkey.
