We are still in an overall bull market and many stocks that smart money investors were piling into surged through October 17th. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 45% and 39% respectively. Hedge funds’ top 3 stock picks returned 34.4% this year and beat the S&P 500 ETFs by 13 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like Hemisphere Media Group Inc (NASDAQ:HMTV).
Hemisphere Media Group Inc (NASDAQ:HMTV) shares haven’t seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 8 hedge funds’ portfolios at the end of June. At the end of this article we will also compare HMTV to other stocks including Harmonic Inc (NASDAQ:HLIT), Progenics Pharmaceuticals, Inc. (NASDAQ:PGNX), and Resources Connection, Inc. (NASDAQ:RECN) to get a better sense of its popularity. Our calculations also showed that HMTV isn’t among the 30 most popular stocks among hedge funds (see the video below).
Video: Click the image to 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 market by 40 percentage points since May 2014 through May 30, 2019 (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 our short portfolio.
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We’re going to take a peek at the fresh hedge fund action encompassing Hemisphere Media Group Inc (NASDAQ:HMTV).
How are hedge funds trading Hemisphere Media Group Inc (NASDAQ:HMTV)?
At the end of the second quarter, a total of 8 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from one quarter earlier. On the other hand, there were a total of 8 hedge funds with a bullish position in HMTV a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
When looking at the institutional investors followed by Insider Monkey, Debra Fine’s Fine Capital Partners has the most valuable position in Hemisphere Media Group Inc (NASDAQ:HMTV), worth close to $26.4 million, accounting for 4.7% of its total 13F portfolio. Sitting at the No. 2 spot is Renaissance Technologies which holds a $9.9 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Some other hedge funds and institutional investors with similar optimism comprise Thomas Ellis and Todd Hammer’s North Run Capital, Will Graves’s Boardman Bay Capital Management and D. E. Shaw’s D E Shaw.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Sabby Capital. One hedge fund selling its entire position doesn’t always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don’t think this is the case in this case because only one of the 800+ hedge funds tracked by Insider Monkey identified as a viable investment and initiated a position in the stock (that fund was Two Sigma Advisors).
Let’s check out hedge fund activity in other stocks similar to Hemisphere Media Group Inc (NASDAQ:HMTV). These stocks are Harmonic Inc (NASDAQ:HLIT), Progenics Pharmaceuticals, Inc. (NASDAQ:PGNX), Resources Connection, Inc. (NASDAQ:RECN), and Blue Bird Corporation (NASDAQ:BLBD). This group of stocks’ market valuations are similar to HMTV’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| HLIT | 14 | 80112 | 0 |
| PGNX | 13 | 88033 | -1 |
| RECN | 13 | 39849 | -1 |
| BLBD | 5 | 65736 | -1 |
| Average | 11.25 | 68433 | -0.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 11.25 hedge funds with bullish positions and the average amount invested in these stocks was $68 million. That figure was $41 million in HMTV’s case. Harmonic Inc (NASDAQ:HLIT) is the most popular stock in this table. On the other hand Blue Bird Corporation (NASDAQ:BLBD) is the least popular one with only 5 bullish hedge fund positions. Hemisphere Media Group Inc (NASDAQ:HMTV) 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 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately HMTV wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); HMTV investors were disappointed as the stock returned -5.4% during the third 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 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far in 2019.
Disclosure: None. This article was originally published at Insider Monkey.
