How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding SIGA Technologies Inc. (NASDAQ:SIGA) and determine whether hedge funds had an edge regarding this stock.
Is SIGA Technologies Inc. (NASDAQ:SIGA) undervalued? Money managers were taking a pessimistic view. The number of long hedge fund bets were trimmed by 1 in recent months. Our calculations also showed that SIGA 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). SIGA was in 10 hedge funds’ portfolios at the end of March. There were 11 hedge funds in our database with SIGA holdings at the end of the previous quarter.
Video: Watch our video about the top 5 most popular hedge fund stocks.
In today’s marketplace there are numerous gauges shareholders put to use to appraise their stock investments. A couple of the most useful gauges are hedge fund and insider trading activity. Our researchers have shown that, historically, those who follow the top picks of the top money managers can beat the S&P 500 by a superb margin (see the details here).
At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a “weekend trading strategy”, so we look into his strategy’s picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller’s investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind we’re going to go over the latest hedge fund action surrounding SIGA Technologies Inc. (NASDAQ:SIGA).
What does smart money think about SIGA Technologies Inc. (NASDAQ:SIGA)?
Heading into the second quarter of 2020, a total of 10 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -9% from the fourth quarter of 2019. The graph below displays the number of hedge funds with bullish position in SIGA over the last 18 quarters. With hedge funds’ sentiment swirling, there exists a few key hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Jet Capital Investors, managed by Matthew Mark, holds the largest position in SIGA Technologies Inc. (NASDAQ:SIGA). Jet Capital Investors has a $11.7 million position in the stock, comprising 5.5% of its 13F portfolio. The second most bullish fund manager is Touk Sinantha of AltraVue Capital, with a $10.9 million position; 9% of its 13F portfolio is allocated to the company. Some other professional money managers with similar optimism contain Wilmot B. Harkey and Daniel Mack’s Nantahala Capital Management, Michael Price’s MFP Investors and Renaissance Technologies. In terms of the portfolio weights assigned to each position AltraVue Capital allocated the biggest weight to SIGA Technologies Inc. (NASDAQ:SIGA), around 8.98% of its 13F portfolio. Jet Capital Investors is also relatively very bullish on the stock, setting aside 5.48 percent of its 13F equity portfolio to SIGA.
Because SIGA Technologies Inc. (NASDAQ:SIGA) has faced falling interest from hedge fund managers, it’s safe to say that there exists a select few hedgies who sold off their entire stakes by the end of the first quarter. At the top of the heap, D. E. Shaw’s D E Shaw said goodbye to the biggest position of the “upper crust” of funds watched by Insider Monkey, worth about $0.1 million in stock, and Chuck Royce’s Royce & Associates was right behind this move, as the fund dropped about $0 million worth. These transactions are interesting, as aggregate hedge fund interest dropped by 1 funds by the end of the first quarter.
Let’s also examine hedge fund activity in other stocks similar to SIGA Technologies Inc. (NASDAQ:SIGA). We will take a look at Antares Pharma Inc (NASDAQ:ATRS), VirnetX Holding Corporation (NYSE:VHC), Donegal Group, Inc. (NASDAQ:DGICB), and Celestica Inc. (NYSE:CLS). This group of stocks’ market valuations resemble SIGA’s market valuation.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
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As you can see these stocks had an average of 9.75 hedge funds with bullish positions and the average amount invested in these stocks was $18 million. That figure was $40 million in SIGA’s case. Antares Pharma Inc (NASDAQ:ATRS) is the most popular stock in this table. On the other hand Donegal Group, Inc. (NASDAQ:DGICB) is the least popular one with only 1 bullish hedge fund positions. SIGA Technologies Inc. (NASDAQ:SIGA) is not the most popular stock in this group but hedge fund interest is still above average. 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 gained 12.3% in 2020 through June 30th but still beat the market by 15.5 percentage points. Hedge funds were also right about betting on SIGA, though not to the same extent, as the stock returned 23.6% during the second quarter and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.