At Insider Monkey we track the activity of some of the best-performing hedge funds like Appaloosa Management, Baupost, and Third Point because we determined that some of the stocks that they are collectively bullish on can help us generate returns above the broader indices. Out of thousands of stocks that hedge funds invest in, small-caps can provide the best returns over the long term due to the fact that these companies are less efficiently priced and are usually under the radars of mass-media, analysts and dumb money. This is why we follow the smart money moves in the small-cap space.
OvaScience Inc (NASDAQ:OVAS) shares didn’t see a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 13 hedge funds’ portfolios at the end of September, same as at the end of June. At the end of this article we will also compare OVAS to other stocks including Bluerock Residential Growth REIT Inc (NYSEMKT:BRG), Bassett Furniture Industries Inc. (NASDAQ:BSET), and Merus NV (NASDAQ:MRUS) to get a better sense of its popularity.
At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.
How are hedge funds trading OvaScience Inc (NASDAQ:OVAS)?
Heading into the fourth quarter of 2016, a total of 13 of the hedge funds tracked by Insider Monkey were bullish on this stock, unchanged from the previous quarter. By comparison, 9 hedge funds held shares or bullish call options in OVAS heading into this year, so hedge fund ownership is up by 44% in 2016. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Of the funds tracked by Insider Monkey, Orbis Investment Management, led by William B. Gray, holds the number one position in OvaScience Inc (NASDAQ:OVAS). Orbis Investment Management has an $18.9 million position in the stock. The second most bullish fund manager is Adage Capital Management, led by Phill Gross and Robert Atchinson, holding a $12.5 million position. Remaining peers that hold long positions include George McCabe’s Portolan Capital Management, Michael Hintze’s CQS Cayman LP, and Thomas E. Claugus’ GMT Capital. We should note that Orbis Investment Management is among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.
Because OvaScience Inc (NASDAQ:OVAS) has faced bearish sentiment from the entirety of the hedge funds we track, we can see that there exists a select few funds that slashed their positions entirely in the third quarter. It’s worth mentioning that Israel Englander’s Millennium Management cut the biggest stake of the “upper crust” of funds monitored by Insider Monkey, comprising an estimated $0.7 million in stock. Adam Usdan’s fund, Trellus Management Company, also dumped its stock, about $0.2 million worth.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as OvaScience Inc (NASDAQ:OVAS) but similarly valued. These stocks are Bluerock Residential Growth REIT Inc (NYSEMKT:BRG), Bassett Furniture Industries Inc. (NASDAQ:BSET), Merus NV (NASDAQ:MRUS), and Great Ajax Corp (NYSE:AJX). This group of stocks’ market values match OVAS’s market value.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
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 $33 million. That figure was $49 million in OVAS’s case. Bassett Furniture Industries Inc. (NASDAQ:BSET) is the most popular stock in this table. On the other hand Great Ajax Corp (NYSE:AJX) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks OvaScience Inc (NASDAQ:OVAS) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.