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Inovalon Holdings Inc (INOV): Are Hedge Funds Right About This Stock?

“Value has performed relatively poorly since the 2017 shift, but we believe challenges to the S&P 500’s dominance are mounting and resulting active opportunities away from the index are growing. At some point, this fault line will break, likely on the back of rising rates, and all investors will be reminded that the best time to diversify away from the winners is when it is most painful. The bargain of capturing long-term value may be short-term pain, but enough is eventually enough and it comes time to harvest the benefits.,” said Clearbridge Investments in its market commentary. We aren’t sure whether long-term interest rates will top 5% and value stocks outperform growth, but we follow hedge fund investor letters to understand where the markets and stocks might be going. That’s why we believe it would be worthwhile to take a look at the hedge fund sentiment on Inovalon Holdings Inc (NASDAQ:INOV) in order to identify whether reputable and successful top money managers continue to believe in its potential.

Inovalon Holdings Inc (NASDAQ:INOV) was in 13 hedge funds’ portfolios at the end of the third quarter of 2018. INOV investors should be aware of an increase in support from the world’s most elite money managers in recent months. There were 12 hedge funds in our database with INOV positions at the end of the previous quarter. Our calculations also showed that inov isn’t among the 30 most popular stocks among hedge funds.

To most market participants, hedge funds are viewed as underperforming, outdated investment vehicles of years past. While there are greater than 8,000 funds in operation today, Our researchers hone in on the upper echelon of this club, about 700 funds. These investment experts preside over bulk of the hedge fund industry’s total capital, and by monitoring their finest investments, Insider Monkey has uncovered many investment strategies that have historically exceeded the market. Insider Monkey’s flagship hedge fund strategy outperformed the S&P 500 index by 6 percentage points per year since its inception in May 2014 through early November 2018. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 24% since February 2017 (through December 3rd) even though the market was up nearly 23% during the same period. We just shared a list of 11 short targets in our latest quarterly update.

Millennium Management, Catapult Capital Management

We’re going to view the latest hedge fund action regarding Inovalon Holdings Inc (NASDAQ:INOV).

What does the smart money think about Inovalon Holdings Inc (NASDAQ:INOV)?

At the end of the third quarter, a total of 13 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 8% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards INOV over the last 13 quarters. With hedgies’ positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).

No of Hedge Funds with INOV Positions

Among these funds, Prescott Group Capital Management held the most valuable stake in Inovalon Holdings Inc (NASDAQ:INOV), which was worth $6.9 million at the end of the third quarter. On the second spot was Renaissance Technologies which amassed $4.1 million worth of shares. Moreover, Rima Senvest Management, Millennium Management, and Citadel Investment Group were also bullish on Inovalon Holdings Inc (NASDAQ:INOV), allocating a large percentage of their portfolios to this stock.

Consequently, specific money managers have jumped into Inovalon Holdings Inc (NASDAQ:INOV) headfirst. Millennium Management, managed by Israel Englander, established the most valuable position in Inovalon Holdings Inc (NASDAQ:INOV). Millennium Management had $2.4 million invested in the company at the end of the quarter. Joel Greenblatt’s Gotham Asset Management also made a $0.1 million investment in the stock during the quarter.

Let’s now review hedge fund activity in other stocks similar to Inovalon Holdings Inc (NASDAQ:INOV). We will take a look at Kratos Defense & Security Solutions, Inc (NASDAQ:KTOS), Oclaro, Inc. (NASDAQ:OCLR), Oxford Industries, Inc. (NYSE:OXM), and BJ’s Restaurants, Inc. (NASDAQ:BJRI). This group of stocks’ market caps are similar to INOV’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
KTOS 13 132648 1
OCLR 22 137595 3
OXM 13 70925 0
BJRI 20 195394 4
Average 17 134141 2

View table here if you experience formatting issues.

As you can see these stocks had an average of 17 hedge funds with bullish positions and the average amount invested in these stocks was $134 million. That figure was $24 million in INOV’s case. Oclaro, Inc. (NASDAQ:OCLR) is the most popular stock in this table. On the other hand Kratos Defense & Security Solutions, Inc (NASDAQ:KTOS) is the least popular one with only 13 bullish hedge fund positions. Compared to these stocks Inovalon Holdings Inc (NASDAQ:INOV) is even less popular than KTOS. Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case more research is warranted.

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

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