These Hedge Funds Cashed Out Of Tactile Systems Technology, Inc. (TCMD) Too Early

We are still in an overall bull market and many stocks that smart money investors were piling into surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Hedge funds’ top 3 stock picks returned 41.7% this year and beat the S&P 500 ETFs by 14 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like Tactile Systems Technology, Inc. (NASDAQ:TCMD).

Tactile Systems Technology, Inc. (NASDAQ:TCMD) investors should pay attention to a decrease in support from the world’s most elite money managers recently. Our calculations also showed that TCMD isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

To most investors, hedge funds are seen as slow, old investment tools of years past. While there are over 8000 funds trading today, Our experts look at the top tier of this group, about 750 funds. These investment experts have their hands on most of the smart money’s total asset base, and by observing their first-class picks, Insider Monkey has figured out various investment strategies that have historically surpassed the market. Insider Monkey’s flagship short hedge fund strategy exceeded the S&P 500 short ETFs by around 20 percentage points per annum since its inception in May 2014. Our portfolio of short stocks lost 27.8% since February 2017 (through November 21st) even though the market was up more than 39% during the same period. We just shared a list of 7 short targets in our latest quarterly update .

David E. Shaw of D.E. Shaw

David E. Shaw of D.E. Shaw

We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius’ weekly trade ideas. This December we recommended Adams Energy  based on an under-the-radar fund manager’s investor letter and the stock gained 20 percent. Let’s take a gander at the latest hedge fund action regarding Tactile Systems Technology, Inc. (NASDAQ:TCMD).

What does smart money think about Tactile Systems Technology, Inc. (NASDAQ:TCMD)?

At the end of the third quarter, a total of 10 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -33% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards TCMD over the last 17 quarters. With hedge funds’ sentiment swirling, there exists an “upper tier” of key hedge fund managers who were adding to their stakes significantly (or already accumulated large positions).

More specifically, Citadel Investment Group was the largest shareholder of Tactile Systems Technology, Inc. (NASDAQ:TCMD), with a stake worth $8.4 million reported as of the end of September. Trailing Citadel Investment Group was Driehaus Capital, which amassed a stake valued at $6.6 million. Marshall Wace, D E Shaw, and PDT Partners 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 Lyon Street Capital allocated the biggest weight to Tactile Systems Technology, Inc. (NASDAQ:TCMD), around 0.78% of its 13F portfolio. Driehaus Capital is also relatively very bullish on the stock, dishing out 0.22 percent of its 13F equity portfolio to TCMD.

Judging by the fact that Tactile Systems Technology, Inc. (NASDAQ:TCMD) has witnessed falling interest from the aggregate hedge fund industry, it’s safe to say that there were a few fund managers that slashed their entire stakes by the end of the third quarter. It’s worth mentioning that John Overdeck and David Siegel’s Two Sigma Advisors sold off the largest position of the 750 funds watched by Insider Monkey, comprising an estimated $3.2 million in stock. Cliff Asness’s fund, AQR Capital Management, also sold off its stock, about $0.9 million worth. These transactions are interesting, as total hedge fund interest was cut by 5 funds by the end of the third quarter.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Tactile Systems Technology, Inc. (NASDAQ:TCMD) but similarly valued. We will take a look at Associated Capital Group, Inc. (NYSE:AC), Central Securities Corporation (NYSE:CET), Codexis, Inc. (NASDAQ:CDXS), and Preferred Bank (NASDAQ:PFBC). This group of stocks’ market caps match TCMD’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
AC 6 64036 0
CET 1 11460 -1
CDXS 8 207419 -4
PFBC 10 37669 -2
Average 6.25 80146 -1.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 6.25 hedge funds with bullish positions and the average amount invested in these stocks was $80 million. That figure was $26 million in TCMD’s case. Preferred Bank (NASDAQ:PFBC) is the most popular stock in this table. On the other hand Central Securities Corporation (NYSE:CET) is the least popular one with only 1 bullish hedge fund positions. Tactile Systems Technology, Inc. (NASDAQ:TCMD) is the most popular stock in this group tied with PFBC. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Hedge funds were also right about betting on TCMD as the stock returned 51.7% during the fourth quarter (through the end of November) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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