Is INS A Good Stock To Buy Now?

With the third-quarter round of 13F filings behind us it is time to take a look at the stocks in which some of the best money managers in the world preferred to invest or sell heading into the fourth quarter. One of these stocks was Intelligent Systems Corporation (NYSE:INS).

Is INS a good stock to buy now? Hedge fund interest in Intelligent Systems Corporation (NYSE:INS) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that INS 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). At the end of this article we will also compare INS to other stocks including Daseke, Inc. (NASDAQ:DSKE), ANI Pharmaceuticals Inc (NASDAQ:ANIP), and Hemisphere Media Group Inc (NASDAQ:HMTV) to get a better sense of its popularity.

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

In the 21st century investor’s toolkit there are plenty of formulas stock market investors have at their disposal to assess stocks. A pair of the less utilized formulas are hedge fund and insider trading indicators. We have shown that, historically, those who follow the best picks of the elite money managers can beat the market by a solid amount (see the details here).

Ian Wace Marshall Wace

Ian Wace of Marshall Wace

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 5 best cheap stocks to buy according to Ray Dalio to identify stocks with upside potential. 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 we’re going to take a look at the new hedge fund action regarding Intelligent Systems Corporation (NYSE:INS).

What have hedge funds been doing with Intelligent Systems Corporation (NYSE:INS)?

At the end of September, a total of 8 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 INS 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.

Among these funds, Wallace R. Weitz & Co. held the most valuable stake in Intelligent Systems Corporation (NYSE:INS), which was worth $34.7 million at the end of the third quarter. On the second spot was Renaissance Technologies which amassed $9.2 million worth of shares. Marshall Wace LLP, AQR Capital Management, and Royce & Associates were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Wallace R. Weitz & Co. allocated the biggest weight to Intelligent Systems Corporation (NYSE:INS), around 1.63% of its 13F portfolio. Winton Capital Management is also relatively very bullish on the stock, dishing out 0.02 percent of its 13F equity portfolio to INS.

We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Navellier & Associates. One hedge fund selling its entire position doesn’t always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don’t think this is the case in this case because only one of the 800+ hedge funds tracked by Insider Monkey identified as a viable investment and initiated a position in the stock (that fund was Citadel Investment Group).

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Intelligent Systems Corporation (NYSE:INS) but similarly valued. These stocks are Daseke, Inc. (NASDAQ:DSKE), ANI Pharmaceuticals Inc (NASDAQ:ANIP), Hemisphere Media Group Inc (NASDAQ:HMTV), Luxfer Holdings PLC (NYSE:LXFR), International General Insurance Holdings Ltd. (NASDAQ:IGIC), Comtech Telecommunications Corp. (NASDAQ:CMTL), and Cadiz Inc (NASDAQ:CDZI). This group of stocks’ market valuations match INS’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
DSKE 11 15708 2
ANIP 8 12473 -2
HMTV 6 24902 -2
LXFR 12 71054 1
IGIC 9 11712 0
CMTL 12 36285 -1
CDZI 7 5833 -2
Average 9.3 25424 -0.6

View table here if you experience formatting issues.

As you can see these stocks had an average of 9.3 hedge funds with bullish positions and the average amount invested in these stocks was $25 million. That figure was $48 million in INS’s case. Luxfer Holdings PLC (NYSE:LXFR) is the most popular stock in this table. On the other hand Hemisphere Media Group Inc (NASDAQ:HMTV) is the least popular one with only 6 bullish hedge fund positions. Intelligent Systems Corporation (NYSE:INS) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for INS is 48.3. 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. 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 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 31.6% in 2020 through December 2nd and surpassed the market again by 16 percentage points. Unfortunately INS wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); INS investors were disappointed as the stock returned -0.4% since the end of September (through 12/2) 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 most of these stocks already outperformed the market in 2020.

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Disclosure: None. This article was originally published at Insider Monkey.