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 750 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 IMAX Corporation (NYSE:IMAX).
IMAX Corporation (NYSE:IMAX) was in 15 hedge funds’ portfolios at the end of the first quarter of 2019. IMAX has experienced an increase in activity from the world’s largest hedge funds recently. There were 14 hedge funds in our database with IMAX positions at the end of the previous quarter. Our calculations also showed that IMAX isn’t among the 30 most popular stocks among hedge funds.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 market by 40 percentage points since May 2014 through May 30, 2019 (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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.
Let’s review the latest hedge fund action regarding IMAX Corporation (NYSE:IMAX).
How have hedgies been trading IMAX Corporation (NYSE:IMAX)?
At Q1’s end, a total of 15 of the hedge funds tracked by Insider Monkey were long this stock, a change of 7% from one quarter earlier. On the other hand, there were a total of 14 hedge funds with a bullish position in IMAX a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in IMAX Corporation (NYSE:IMAX) was held by Arrowstreet Capital, which reported holding $11.2 million worth of stock at the end of March. It was followed by Renaissance Technologies with a $10.4 million position. Other investors bullish on the company included Two Sigma Advisors, GLG Partners, and IBIS Capital Partners.
Consequently, key hedge funds have been driving this bullishness. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, assembled the biggest position in IMAX Corporation (NYSE:IMAX). Arrowstreet Capital had $11.2 million invested in the company at the end of the quarter. Mike Vranos’s Ellington also initiated a $0.4 million position during the quarter. The other funds with brand new IMAX positions are Jeffrey Talpins’s Element Capital Management, Ken Griffin’s Citadel Investment Group, and Charles Clough’s Clough Capital Partners.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as IMAX Corporation (NYSE:IMAX) but similarly valued. These stocks are Central Puerto S.A. (NYSE:CEPU), Aimmune Therapeutics Inc (NASDAQ:AIMT), Ambarella Inc (NASDAQ:AMBA), and Shutterfly, Inc. (NASDAQ:SFLY). All of these stocks’ market caps resemble IMAX’s market cap.
|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 18.5 hedge funds with bullish positions and the average amount invested in these stocks was $192 million. That figure was $41 million in IMAX’s case. Shutterfly, Inc. (NASDAQ:SFLY) is the most popular stock in this table. On the other hand Central Puerto S.A. (NYSE:CEPU) is the least popular one with only 12 bullish hedge fund positions. IMAX Corporation (NYSE:IMAX) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. Unfortunately IMAX wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); IMAX investors were disappointed as the stock returned -10% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 13 of these stocks already outperformed the market so far in Q2.
Disclosure: None. This article was originally published at Insider Monkey.