We at Insider Monkey have gone over 700 13F filings that hedge funds and prominent investors are required to file by the government. The 13F filings show the funds’ and investors’ portfolio positions as of September 30th. In this article we look at what those investors think of Digirad Corporation (NASDAQ:DRAD).
Digirad Corporation (NASDAQ:DRAD) was in 4 hedge funds’ portfolios at the end of the third quarter of 2015, which was flat from the number of funds long the stock at the end of the second quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Actinium Pharmaceuticals Inc (NYSEMKT:ATNM), Javelin Mortgage Investment Corp (NYSE:JMI), and MeetMe Inc (NYSEAMEX:MEET) to gather more data points.
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To most stock holders, hedge funds are assumed to be underperforming, outdated investment vehicles of years past. While there are greater than 8000 funds in operation at present, our experts hone in on the bigwigs of this group, about 700 funds. It is estimated that this group of investors direct most of the smart money’s total capital, and by shadowing their matchless equity investments, Insider Monkey has formulated several investment strategies that have historically defeated the broader indices. Insider Monkey’s small-cap hedge fund strategy surpassed the S&P 500 index by 12 percentage points per annum for a decade in their back tests.
With all of this in mind, we’re going to analyze the recent action surrounding Digirad Corporation (NASDAQ:DRAD).
What have hedge funds been doing with Digirad Corporation (NASDAQ:DRAD)?
At the end of Q3, a total of 4 of the hedge funds tracked by Insider Monkey were long in this stock, flat over the second quarter. With the smart money’s positions undergoing their usual ebb and flow, there exists an “upper tier” of key hedge fund managers who were upping their stakes significantly (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, J. Carlo Cannell’s Cannell Capital had the largest position in Digirad Corporation (NASDAQ:DRAD), worth close to $3.5 million, corresponding to 1.3% of its total 13F portfolio. Sitting at the No. 2 spot is Renaissance Technologies, which held a $3.5 million position; the fund has less than 0.1% of its 13F portfolio invested in the stock. Other hedgies that hold long positions consist of Peter Algert and Kevin Coldiron’s Algert Coldiron Investors, and John Overdeck and David Siegel’s Two Sigma Advisors .
We view the flat hedge fund activity in the stock as unfavorable, but in this case there was only a single hedge fund selling its entire position: Nine Chapters Capital Management. 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 700+ hedge funds tracked by Insider Monkey identified as a viable investment and initiated a position in the stock (that fund was Algert Coldiron Investors).
Let’s now take a look at hedge fund activity in other stocks similar to Digirad Corporation (NASDAQ:DRAD). These stocks are Actinium Pharmaceuticals Inc (NYSEMKT:ATNM), Javelin Mortgage Investment Corp (NYSE:JMI), MeetMe Inc (NYSEAMEX:MEET), and Hansen Medical, Inc. (NASDAQ:HNSN). All of these stocks’ market caps are similar to Digirad Corporation (NASDAQ:DRAD)’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
As you can see these stocks had an average of 5 hedge funds with bullish positions and the average amount invested in these stocks was $8 million.That figure was $7 millions in Digirad Corporation (NASDAQ:DRAD)’s case. Javelin Mortgage Investment Corp (NYSE:JMI) is the most popular stock in this table. On the other hand, MeetMe Inc (NYSEAMEX:MEET) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks Digirad Corporation (NASDAQ:DRAD) is even less popular than MeetMe Inc (NYSEAMEX:MEET). Considering that hedge funds aren’t fond of this stock, 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.