Is Alliance HealthCare Services, Inc. (AIQ) A Good Stock To Buy?

Insider Monkey has processed numerous 13F filings of hedge funds and famous investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds and investors’ positions as of the end of the third quarter. You can find write-ups about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves and analyze what the smart money thinks of Alliance HealthCare Services, Inc. (NASDAQ:AIQ) based on that data.

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Alliance HealthCare Services, Inc. has experienced an increase in hedge fund interest recently. AIQ was in 6 hedge funds’ portfolio at the end of the third quarter of 2015. There were 5 hedge funds in our database with AIQ holdings at the end of the previous quarter. At the end of this article we will also compare AIQ to other stocks including Achaogen Inc (NASDAQ:AKAO), Epirus Biopharmaceuticals Inc (NASDAQ:EPRS), and Vermillion, Inc. (NASDAQ:VRML) to get a better sense of its popularity.

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If you’d ask most traders, hedge funds are assumed to be underperforming, old financial vehicles of the past. While there are more than 8000 funds with their doors open at the moment, Experts at Insider Monkey, a website specializing in hedge funds, hone in on the masters of this club, around 700 funds. These money managers manage the lion’s share of the smart money’s total capital, and by observing their top picks, Insider Monkey has brought to light various investment strategies that have historically defeated Mr. Market. Insider Monkey’s small-cap hedge fund strategy outperformed the S&P 500 index by 12 percentage points annually for a decade in their back tests.

Keeping this in mind, let’s check out the recent action regarding Alliance HealthCare Services, Inc. (NASDAQ:AIQ).

How are hedge funds trading Alliance HealthCare Services, Inc. (NASDAQ:AIQ)?

At Q3’s end, a total of 6 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 20% from one quarter earlier. With hedge funds’ sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were boosting their stakes considerably.

When looking at the hedgies followed by Insider Monkey, Oaktree Capital Management, managed by Howard Marks, holds the biggest position in Alliance HealthCare Services, Inc. (NASDAQ:AIQ). Oaktree Capital Management has a $46.4 million position in the stock, comprising 0.6% of its 13F portfolio. The second most bullish hedge fund manager is Renaissance Technologies, managed by Jim Simons, which held a $5.9 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Some other peers with similar optimism consist of Anders Hallberg and Carl Bennet’s HealthInvest Partners AB, Chuck Royce’s Royce & Associates and John Overdeck and David Siegel’s Two Sigma Advisors.

As aggregate interest increased, specific money managers were leading the bulls’ herd. Royce & Associates, managed by Chuck Royce, initiated the most valuable position in Alliance HealthCare Services, Inc. (NASDAQ:AIQ). Royce & Associates had $0.3 million invested in the company at the end of the quarter.

Let’s also examine hedge fund activity in other stocks similar to Alliance HealthCare Services, Inc. (NASDAQ:AIQ). We will take a look at Achaogen Inc (NASDAQ:AKAO), Epirus Biopharmaceuticals Inc (NASDAQ:EPRS), Vermillion, Inc. (NASDAQ:VRML), and Digital Turbine Inc (NASDAQ:APPS). This group of stocks’ market caps match AIQ’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
AKAO 7 10046 -2
EPRS 10 32328 0
VRML 4 6506 1
APPS 7 11912 0

As you can see these stocks had an average of 7 hedge funds with bullish positions and the average amount invested in these stocks was $15 million. Epirus Biopharmaceuticals Inc (NASDAQ:EPRS) is the most popular stock in this table. On the other hand Vermillion, Inc. (NASDAQ:VRML) is the least popular one with only 4 bullish hedge fund positions. Alliance HealthCare Services, Inc. (NASDAQ:AIQ) 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 VRML might be a better candidate to consider a long position.