Should I Avoid Streamline Health Solutions Inc. (STRM)?

In this article we will take a look at whether hedge funds think Streamline Health Solutions Inc. (NASDAQ:STRM) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.

Streamline Health Solutions Inc. (NASDAQ:STRM) has experienced a decrease in hedge fund sentiment lately. Streamline Health Solutions Inc. (NASDAQ:STRM) was in 5 hedge funds’ portfolios at the end of the first quarter of 2021. The all time high for this statistic is 8. There were 7 hedge funds in our database with STRM positions at the end of the fourth quarter. Our calculations also showed that STRM isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).

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 S&P 500 ETFs by 115 percentage points since March 2017 (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.

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, an activist hedge fund owns nearly 40% of this $23 biotech stock and is trying to buy the rest for around $50. So, we recommended a long position to our monthly premium newsletter subscribers. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. With all of this in mind we’re going to analyze the latest hedge fund action surrounding Streamline Health Solutions Inc. (NASDAQ:STRM).

Do Hedge Funds Think STRM Is A Good Stock To Buy Now?

At Q1’s end, a total of 5 of the hedge funds tracked by Insider Monkey were long this stock, a change of -29% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in STRM over the last 23 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Tamarack Capital Management was the largest shareholder of Streamline Health Solutions Inc. (NASDAQ:STRM), with a stake worth $10.1 million reported as of the end of March. Trailing Tamarack Capital Management was Harbert Management, which amassed a stake valued at $8.1 million. Roumell Asset Management, Endurant Capital Management, and Renaissance Technologies 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 Roumell Asset Management allocated the biggest weight to Streamline Health Solutions Inc. (NASDAQ:STRM), around 5.61% of its 13F portfolio. Harbert Management is also relatively very bullish on the stock, earmarking 3.84 percent of its 13F equity portfolio to STRM.

Judging by the fact that Streamline Health Solutions Inc. (NASDAQ:STRM) has faced a decline in interest from the entirety of the hedge funds we track, logic holds that there were a few hedge funds that slashed their entire stakes in the first quarter. Intriguingly, Wilmot B. Harkey and Daniel Mack’s Nantahala Capital Management cut the biggest investment of all the hedgies followed by Insider Monkey, valued at an estimated $4.3 million in stock. Israel Englander’s fund, Millennium Management, also dropped its stock, about $0.1 million worth. These transactions are interesting, as aggregate hedge fund interest dropped by 2 funds in the first quarter.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Streamline Health Solutions Inc. (NASDAQ:STRM) but similarly valued. We will take a look at Issuer Direct Corporation (NYSE:ISDR), Key Tronic Corporation (NASDAQ:KTCC), United Bancshares Inc. (NASDAQ:UBOH), WidePoint Corporation (NYSE:WYY), ZW Data Action Technologies Inc. (NASDAQ:CNET), United Bancorp, Inc. (NASDAQ:UBCP), and FFBW, Inc. (NASDAQ:FFBW). This group of stocks’ market valuations resemble STRM’s market valuation.

View table here if you experience formatting issues.

As you can see these stocks had an average of 1.9 hedge funds with bullish positions and the average amount invested in these stocks was $2 million. That figure was $24 million in STRM’s case. FFBW, Inc. (NASDAQ:FFBW) is the most popular stock in this table. On the other hand United Bancshares Inc. (NASDAQ:UBOH) is the least popular one with only 1 bullish hedge fund positions. Compared to these stocks Streamline Health Solutions Inc. (NASDAQ:STRM) is more popular among hedge funds. Our overall hedge fund sentiment score for STRM is 71.8. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 17.4% in 2021 through June 18th and still beat the market by 6.1 percentage points. Unfortunately STRM wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on STRM were disappointed as the stock returned -12.7% since the end of the first quarter (through 6/18) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market since 2019.

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