Is DMAC A Good Stock To Buy Now?

In this article we will take a look at whether hedge funds think DiaMedica Therapeutics Inc. (NASDAQ:DMAC) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.

Is DMAC a good stock to buy now? The smart money was becoming more confident. The number of long hedge fund bets inched up by 4 lately. DiaMedica Therapeutics Inc. (NASDAQ:DMAC) was in 10 hedge funds’ portfolios at the end of September. The all time high for this statistics is 6. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that DMAC isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks). There were 6 hedge funds in our database with DMAC positions at the end of the second quarter.

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

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 113% since March 2017 and outperformed the S&P 500 ETFs by more than 66 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Wil Harkey Nantahala Capital

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Keeping this in mind let’s analyze the key hedge fund action regarding DiaMedica Therapeutics Inc. (NASDAQ:DMAC).

Do Hedge Funds Think DMAC Is A Good Stock To Buy Now?

At Q3’s end, a total of 10 of the hedge funds tracked by Insider Monkey were long this stock, a change of 67% from the second quarter of 2020. The graph below displays the number of hedge funds with bullish position in DMAC over the last 21 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is DMAC A Good Stock To Buy?

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Stonepine Capital, managed by Timothy P. Lynch, holds the number one position in DiaMedica Therapeutics Inc. (NASDAQ:DMAC). Stonepine Capital has a $4.9 million position in the stock, comprising 5.1% of its 13F portfolio. The second largest stake is held by Point72 Asset Management, led by Steve Cohen, holding a $3.4 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Other professional money managers that are bullish contain Wilmot B. Harkey and Daniel Mack’s Nantahala Capital Management, Mark Hart III’s Corriente Advisors and Warren Lammert’s Granite Point Capital. In terms of the portfolio weights assigned to each position Stonepine Capital allocated the biggest weight to DiaMedica Therapeutics Inc. (NASDAQ:DMAC), around 5.06% of its 13F portfolio. Corriente Advisors is also relatively very bullish on the stock, dishing out 1.57 percent of its 13F equity portfolio to DMAC.

Now, key hedge funds have jumped into DiaMedica Therapeutics Inc. (NASDAQ:DMAC) headfirst. Point72 Asset Management, managed by Steve Cohen, established the largest position in DiaMedica Therapeutics Inc. (NASDAQ:DMAC). Point72 Asset Management had $3.4 million invested in the company at the end of the quarter. Neil Shahrestani’s Ikarian Capital also initiated a $1.8 million position during the quarter. The following funds were also among the new DMAC investors: Nathan Fischel’s DAFNA Capital Management and Louis Bacon’s Moore Global Investments.

Let’s now review hedge fund activity in other stocks similar to DiaMedica Therapeutics Inc. (NASDAQ:DMAC). We will take a look at CF Bankshares Inc (NASDAQ:CFBK), Hall of Fame Resort & Entertainment Company (NASDAQ:HOFV), Old Point Financial Corporation (NASDAQ:OPOF), Limestone Bancorp, Inc. (NASDAQ:LMST), Lake Shore Bancorp, Inc. (NASDAQ:LSBK), Lifeway Foods, Inc. (NASDAQ:LWAY), and J Alexander’s Holdings Inc (NYSE:JAX). All of these stocks’ market caps match DMAC’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CFBK 1 3248 0
HOFV 3 457 3
OPOF 2 2006 -1
LMST 2 3897 0
LSBK 1 353 0
LWAY 4 2691 1
JAX 10 13023 -3
Average 3.3 3668 0

View table here if you experience formatting issues.

As you can see these stocks had an average of 3.3 hedge funds with bullish positions and the average amount invested in these stocks was $4 million. That figure was $23 million in DMAC’s case. J Alexander’s Holdings Inc (NYSE:JAX) is the most popular stock in this table. On the other hand CF Bankshares Inc (NASDAQ:CFBK) is the least popular one with only 1 bullish hedge fund positions. DiaMedica Therapeutics Inc. (NASDAQ:DMAC) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for DMAC is 89. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 32.9% in 2020 through December 8th and still beat the market by 16.2 percentage points. Hedge funds were also right about betting on DMAC as the stock returned 49.8% since the end of Q3 (through 12/8) 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.