Investing in hedge funds can bring large profits, but it’s not for everybody, since hedge funds are available only for high-net-worth individuals. They generate significant returns for investors to justify their large fees and they allocate a lot of time and employ a complex analysis to determine the best stocks to invest in. A particularly interesting group of stocks that hedge funds like is the small-caps. The huge amount of capital does not allow hedge funds to invest a lot in small-caps, but our research showed that their most popular small-cap ideas are less efficiently priced and generate stronger returns than their large- and mega-cap picks and the broader market. That is why we follow the hedge fund activity in the small-cap space.
One stock that saw an increase in popularity among hedge funds last quarter is Hercules Technology Growth Capital Inc (NYSE:HTGC). At the end of September, 12 funds in our database held HTGC positions. At the end of this article we will also compare HTGC to other stocks including Hannon Armstrong Sustnbl Infrstr Cap Inc (NYSE:HASI), S & T Bancorp Inc (NASDAQ:STBA), and National HealthCare Corporation (NYSEAMEX:NHC) to get a better sense of its popularity.
We care about hedge fund sentiment because historically hedge funds’ stock picks delivered strong risk adjusted returns. There are certain segments of the market where hedge funds’ stock picks performed much better than its benchmarks. For instance, the 30 most popular mid-cap stocks among the best performing hedge funds returned 18% over the last 12 months outpacing S&P 500 Index by more than 10 percentage points. We developed this strategy 2.5 years ago and started sharing its picks in our quarterly newsletter. It bested the S&P 500 Index ETFs by delivering a solid 39% vs. 22% gain for its benchmarks.
Keeping this in mind, we’re going to view the latest action encompassing Hercules Technology Growth Capital Inc (NYSE:HTGC).
What have hedge funds been doing with Hercules Technology Growth Capital Inc (NYSE:HTGC)?
At the end of the third quarter, a total of 12 of the hedge funds tracked by Insider Monkey were long this stock, a change of 9% from the previous quarter. The graph below displays the number of hedge funds with bullish position in HTGC over the last five quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
When looking at the institutional investors followed by Insider Monkey, Cardinal Capital, led by Amy Minella, holds the biggest position in Hercules Technology Growth Capital Inc (NYSE:HTGC). Cardinal Capital has a $8.5 million position in the stock, comprising 0.4% of its 13F portfolio. The second largest stake is held by Clough Capital Partners, led by Charles Clough, which holds a $4.4 million position; 0.2% of its 13F portfolio is allocated to the stock. Other members of the smart money that are bullish encompass Israel Englander’s Millennium Management, one of the 10 largest hedge funds in the world, Robert B. Gillam’s McKinley Capital Management, and John Overdeck and David Siegel’s Two Sigma Advisors. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.