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Is NeoGenomics, Inc. (NEO) Going To Burn These Hedge Funds ?

After several tireless days we have finished crunching the numbers from nearly 750 13F filings issued by the elite hedge funds and other investment firms that we track at Insider Monkey, which disclosed those firms’ equity portfolios as of June 28. The results of that effort will be put on display in this article, as we share valuable insight into the smart money sentiment towards NeoGenomics, Inc. (NASDAQ:NEO).

Is NeoGenomics, Inc. (NASDAQ:NEO) a superb stock to buy now? Hedge funds are turning bullish. The number of bullish hedge fund positions moved up by 2 recently. Our calculations also showed that NEO isn’t among the 30 most popular stocks among hedge funds (see the video below).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to 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 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.

Paul Marshall Marshall Wace

Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We’re going to take a look at the recent hedge fund action encompassing NeoGenomics, Inc. (NASDAQ:NEO).

What does smart money think about NeoGenomics, Inc. (NASDAQ:NEO)?

Heading into the third quarter of 2019, a total of 17 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 13% from one quarter earlier. On the other hand, there were a total of 13 hedge funds with a bullish position in NEO a year ago. With hedgies’ positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were upping their stakes substantially (or already accumulated large positions).

No of Hedge Funds with NEO Positions

The largest stake in NeoGenomics, Inc. (NASDAQ:NEO) was held by Marshall Wace LLP, which reported holding $29.8 million worth of stock at the end of March. It was followed by Driehaus Capital with a $20 million position. Other investors bullish on the company included Royce & Associates, Point72 Asset Management, and AQR Capital Management.

Consequently, key hedge funds have jumped into NeoGenomics, Inc. (NASDAQ:NEO) headfirst. Point72 Asset Management, managed by Steve Cohen, created the biggest position in NeoGenomics, Inc. (NASDAQ:NEO). Point72 Asset Management had $6 million invested in the company at the end of the quarter. Ken Griffin’s Citadel Investment Group also made a $4.4 million investment in the stock during the quarter. The other funds with new positions in the stock are Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital and Benjamin A. Smith’s Laurion Capital Management.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as NeoGenomics, Inc. (NASDAQ:NEO) but similarly valued. These stocks are Mednax Inc. (NYSE:MD), SVMK Inc. (NASDAQ:SVMK), Advanced Energy Industries, Inc. (NASDAQ:AEIS), and Werner Enterprises, Inc. (NASDAQ:WERN). This group of stocks’ market valuations are similar to NEO’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
MD 18 269365 -5
SVMK 23 453141 3
AEIS 14 138830 -3
WERN 15 111134 -1
Average 17.5 243118 -1.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 17.5 hedge funds with bullish positions and the average amount invested in these stocks was $243 million. That figure was $93 million in NEO’s case. SVMK Inc. (NASDAQ:SVMK) is the most popular stock in this table. On the other hand Advanced Energy Industries, Inc. (NASDAQ:AEIS) is the least popular one with only 14 bullish hedge fund positions. NeoGenomics, Inc. (NASDAQ:NEO) 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 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately NEO wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); NEO investors were disappointed as the stock returned -12.9% during the third quarter 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 many of these stocks already outperformed the market so far in 2019.

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

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