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Should You Avoid InfuSystem Holdings, Inc. (INFU)?

At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards InfuSystem Holdings, Inc. (NYSE:INFU).

InfuSystem Holdings, Inc. (NYSE:INFU) shareholders have witnessed a decrease in hedge fund interest in recent months. Our calculations also showed that INFU isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).

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

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 58 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

RENAISSANCE TECHNOLOGIES

Jim Simons of Renaissance Technologies

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out stocks recommended/scorned by legendary Bill Miller. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we’re going to take a look at the new hedge fund action surrounding InfuSystem Holdings, Inc. (NYSE:INFU).

How have hedgies been trading InfuSystem Holdings, Inc. (NYSE:INFU)?

Heading into the second quarter of 2020, a total of 7 of the hedge funds tracked by Insider Monkey were long this stock, a change of -22% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in INFU over the last 18 quarters. With hedgies’ positions undergoing their usual ebb and flow, there exists an “upper tier” of noteworthy hedge fund managers who were increasing their holdings meaningfully (or already accumulated large positions).

Is INFU A Good Stock To Buy?

Among these funds, Minerva Advisors held the most valuable stake in InfuSystem Holdings, Inc. (NYSE:INFU), which was worth $15.5 million at the end of the third quarter. On the second spot was Renaissance Technologies which amassed $4.1 million worth of shares. Parkman Healthcare Partners, Millennium Management, and Arrowstreet Capital 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 Minerva Advisors allocated the biggest weight to InfuSystem Holdings, Inc. (NYSE:INFU), around 12.23% of its 13F portfolio. Parkman Healthcare Partners is also relatively very bullish on the stock, setting aside 0.67 percent of its 13F equity portfolio to INFU.

Due to the fact that InfuSystem Holdings, Inc. (NYSE:INFU) has faced falling interest from the entirety of the hedge funds we track, it’s safe to say that there is a sect of hedgies that slashed their positions entirely by the end of the first quarter. Intriguingly, Michael Gelband’s ExodusPoint Capital said goodbye to the biggest investment of the 750 funds tracked by Insider Monkey, valued at about $0.3 million in stock. David Nguyen and Nancy Oh’s fund, One68 Global Capital, also dropped its stock, about $0.2 million worth. These moves are important to note, as total hedge fund interest dropped by 2 funds by the end of the first quarter.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as InfuSystem Holdings, Inc. (NYSE:INFU) but similarly valued. We will take a look at Norwood Financial Corp. (NASDAQ:NWFL), KVH Industries, Inc. (NASDAQ:KVHI), Northern Dynasty Minerals Ltd. (NYSE:NAK), and Provident Bancorp, Inc. (NASDAQ:PVBC). This group of stocks’ market caps resemble INFU’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
NWFL 2 1990 0
KVHI 6 10489 1
NAK 5 7362 -1
PVBC 6 5603 -2
Average 4.75 6361 -0.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 4.75 hedge funds with bullish positions and the average amount invested in these stocks was $6 million. That figure was $23 million in INFU’s case. KVH Industries, Inc. (NASDAQ:KVHI) is the most popular stock in this table. On the other hand Norwood Financial Corp. (NASDAQ:NWFL) is the least popular one with only 2 bullish hedge fund positions. Compared to these stocks InfuSystem Holdings, Inc. (NYSE:INFU) is more popular among hedge funds. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks returned 13.9% in 2020 through June 10th but still managed to beat the market by 14.2 percentage points. Hedge funds were also right about betting on INFU as the stock returned 46.2% so far in Q2 (through June 10th) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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