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iCAD Inc (ICAD): Hedge Funds Sticking Around

At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (see why hell is coming). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards iCAD Inc (NASDAQ:ICAD) at the end of the first quarter and determine whether the smart money was really smart about this stock.

iCAD Inc (NASDAQ:ICAD) shares haven’t seen a lot of action during the first quarter. Overall, hedge fund sentiment was unchanged. The stock was in 13 hedge funds’ portfolios at the end of March. At the end of this article we will also compare ICAD to other stocks including Chico’s FAS, Inc. (NYSE:CHS), Applied Optoelectronics Inc (NASDAQ:AAOI), and SB One Bancorp (NASDAQ:SBBX) to get a better sense of its popularity.

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

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 58 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 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Xiniya Earnings Call Transcript XNY 2014 Q3

New York Stock Exchange

At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a “weekend trading strategy”, so we look into his strategy’s picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller’s investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind let’s view the latest hedge fund action encompassing iCAD Inc (NASDAQ:ICAD).

How have hedgies been trading iCAD Inc (NASDAQ:ICAD)?

At the end of the first quarter, a total of 13 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the previous quarter. By comparison, 4 hedge funds held shares or bullish call options in ICAD a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Parkman Healthcare Partners was the largest shareholder of iCAD Inc (NASDAQ:ICAD), with a stake worth $5.3 million reported as of the end of September. Trailing Parkman Healthcare Partners was Renaissance Technologies, which amassed a stake valued at $4.8 million. G2 Investment Partners Management, Manatuck Hill Partners, and Millennium Management 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 Parkman Healthcare Partners allocated the biggest weight to iCAD Inc (NASDAQ:ICAD), around 2.47% of its 13F portfolio. G2 Investment Partners Management is also relatively very bullish on the stock, designating 1.49 percent of its 13F equity portfolio to ICAD.

Seeing as iCAD Inc (NASDAQ:ICAD) has experienced falling interest from the aggregate hedge fund industry, it’s easy to see that there exists a select few fund managers that slashed their full holdings last quarter. It’s worth mentioning that Guy Levy’s Soleus Capital dumped the biggest investment of the 750 funds tracked by Insider Monkey, valued at an estimated $0.7 million in stock. Michael Gelband’s fund, ExodusPoint Capital, also dropped its stock, about $0.3 million worth. These transactions are intriguing to say the least, as total hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as iCAD Inc (NASDAQ:ICAD) but similarly valued. We will take a look at Chico’s FAS, Inc. (NYSE:CHS), Applied Optoelectronics Inc (NASDAQ:AAOI), SB One Bancorp (NASDAQ:SBBX), and Chiasma Inc (NASDAQ:CHMA). This group of stocks’ market values are similar to ICAD’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CHS 18 31204 1
AAOI 8 12005 -5
SBBX 6 8649 -1
CHMA 12 45011 0
Average 11 24217 -1.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 11 hedge funds with bullish positions and the average amount invested in these stocks was $24 million. That figure was $22 million in ICAD’s case. Chico’s FAS, Inc. (NYSE:CHS) is the most popular stock in this table. On the other hand SB One Bancorp (NASDAQ:SBBX) is the least popular one with only 6 bullish hedge fund positions. iCAD Inc (NASDAQ:ICAD) is not the most popular stock in this group but hedge fund interest is still above average. 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 13.3% in 2020 through June 25th but still beat the market by 16.8 percentage points. Hedge funds were also right about betting on ICAD as the stock returned 51.2% in Q2 (through June 25th) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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Disclosure: None. This article was originally published at Insider Monkey.