How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding Hanger, Inc. (NYSE:HNGR).
Is HNGR a good stock to buy now? Hanger, Inc. (NYSE:HNGR) shares haven’t seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 14 hedge funds’ portfolios at the end of September. Our calculations also showed that HNGR 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). 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 Impinj, Inc. (NASDAQ:PI), Camtek LTD. (NASDAQ:CAMT), and Orthofix Medical Inc (NASDAQ:OFIX) to gather more data points.
Video: Watch our video about the top 5 most popular hedge fund stocks.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 66 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
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 go over the latest hedge fund action surrounding Hanger, Inc. (NYSE:HNGR).
Do Hedge Funds Think HNGR Is A Good Stock To Buy Now?
At the end of September, a total of 14 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in HNGR over the last 21 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, SCW Capital Management, managed by John R. Wagner, holds the number one position in Hanger, Inc. (NYSE:HNGR). SCW Capital Management has a $22.2 million position in the stock, comprising 12.8% of its 13F portfolio. Sitting at the No. 2 spot is J. Carlo Cannell of Cannell Capital, with a $12.1 million position; 4.4% of its 13F portfolio is allocated to the company. Remaining professional money managers that are bullish consist of Renaissance Technologies, John W. Rogers’s Ariel Investments and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital. In terms of the portfolio weights assigned to each position SCW Capital Management allocated the biggest weight to Hanger, Inc. (NYSE:HNGR), around 12.84% of its 13F portfolio. Cannell Capital is also relatively very bullish on the stock, dishing out 4.44 percent of its 13F equity portfolio to HNGR.
Seeing as Hanger, Inc. (NYSE:HNGR) has faced falling interest from the entirety of the hedge funds we track, we can see that there exists a select few money managers that slashed their full holdings last quarter. Intriguingly, J. Daniel Plants’s Voce Capital dumped the biggest stake of the 750 funds followed by Insider Monkey, totaling about $1.6 million in stock, and Benjamin A. Smith’s Laurion Capital Management was right behind this move, as the fund dumped about $0.2 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s go over hedge fund activity in other stocks similar to Hanger, Inc. (NYSE:HNGR). These stocks are Impinj, Inc. (NASDAQ:PI), Camtek LTD. (NASDAQ:CAMT), Orthofix Medical Inc (NASDAQ:OFIX), Calliditas Therapeutics AB (publ) (NASDAQ:CALT), Accelerate Diagnostics Inc (NASDAQ:AXDX), Amyris Inc (NASDAQ:AMRS), and Meredith Corporation (NYSE:MDP). This group of stocks’ market values resemble HNGR’s market value.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 13.6 hedge funds with bullish positions and the average amount invested in these stocks was $102 million. That figure was $57 million in HNGR’s case. Meredith Corporation (NYSE:MDP) is the most popular stock in this table. On the other hand Camtek LTD. (NASDAQ:CAMT) is the least popular one with only 8 bullish hedge fund positions. Hanger, Inc. (NYSE:HNGR) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for HNGR is 54.1. 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 HNGR as the stock returned 50.5% since the end of Q3 (through 12/8) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.