Out of thousands of stocks that are currently traded on the market, it is difficult to identify those that will really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of nearly 817 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has the potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about iCAD Inc (NASDAQ:ICAD).
Is ICAD a good stock to buy now? iCAD Inc (NASDAQ:ICAD) was in 14 hedge funds’ portfolios at the end of September. The all time high for this statistic is 13. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. ICAD investors should be aware of an increase in hedge fund interest of late. There were 12 hedge funds in our database with ICAD positions at the end of the second quarter. Our calculations also showed that ICAD 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).
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.
Roger Ibbotson of Zebra Capital Management
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 take a look at the recent hedge fund action regarding iCAD Inc (NASDAQ:ICAD).
Do Hedge Funds Think ICAD Is A Good Stock To Buy Now?
Heading into the fourth quarter of 2020, a total of 14 of the hedge funds tracked by Insider Monkey were long this stock, a change of 17% from the second quarter of 2020. By comparison, 6 hedge funds held shares or bullish call options in ICAD a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in iCAD Inc (NASDAQ:ICAD) was held by G2 Investment Partners Management, which reported holding $9.7 million worth of stock at the end of September. It was followed by Parkman Healthcare Partners with a $5.1 million position. Other investors bullish on the company included Portolan Capital Management, Renaissance Technologies, and Fairpointe Capital. In terms of the portfolio weights assigned to each position G2 Investment Partners Management allocated the biggest weight to iCAD Inc (NASDAQ:ICAD), around 2.35% of its 13F portfolio. Parkman Healthcare Partners is also relatively very bullish on the stock, dishing out 1.36 percent of its 13F equity portfolio to ICAD.
Consequently, key hedge funds were breaking ground themselves. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, initiated the most outsized position in iCAD Inc (NASDAQ:ICAD). Arrowstreet Capital had $0.3 million invested in the company at the end of the quarter. Roger Ibbotson’s Zebra Capital Management also initiated a $0.3 million position during the quarter. The only other fund with a brand new ICAD position is Cliff Asness’s AQR Capital Management.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as iCAD Inc (NASDAQ:ICAD) but similarly valued. We will take a look at T2 Biosystems Inc (NASDAQ:TTOO), Veritiv Corp (NYSE:VRTV), WhiteHorse Finance, Inc. (NASDAQ:WHF), VIA optronics AG (NYSE:VIAO), Civista Bancshares, Inc. (NASDAQ:CIVB), Alpha Pro Tech, Ltd. (NYSE:APT), and AquaBounty Technologies, Inc. (NASDAQ:AQB). All of these stocks’ market caps match ICAD’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| TTOO | 4 | 562 | 0 |
| VRTV | 11 | 52963 | 1 |
| WHF | 3 | 1895 | 0 |
| VIAO | 10 | 8592 | 10 |
| CIVB | 11 | 7096 | -1 |
| APT | 6 | 24429 | -2 |
| AQB | 4 | 1751 | 0 |
| Average | 7 | 13898 | 1.1 |
View table here if you experience formatting issues.
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 $14 million. That figure was $32 million in ICAD’s case. Veritiv Corp (NYSE:VRTV) is the most popular stock in this table. On the other hand WhiteHorse Finance, Inc. (NASDAQ:WHF) is the least popular one with only 3 bullish hedge fund positions. Compared to these stocks iCAD Inc (NASDAQ:ICAD) is more popular among hedge funds. Our overall hedge fund sentiment score for ICAD is 87. 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 returned 32.9% in 2020 through December 8th but still managed to beat the market by 16.2 percentage points. Hedge funds were also right about betting on ICAD as the stock returned 38% since the end of September (through 12/8) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
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Disclosure: None. This article was originally published at Insider Monkey.
