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 Luna Innovations Incorporated (NASDAQ:LUNA).
Luna Innovations Incorporated (NASDAQ:LUNA) has seen an increase in support from the world’s most elite money managers recently. Luna Innovations Incorporated (NASDAQ:LUNA) was in 11 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistics is 14. Our calculations also showed that LUNA isn’t among the 30 most popular stocks among hedge funds (click for Q3 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.
In the eyes of most market participants, hedge funds are perceived as underperforming, old investment tools of years past. While there are more than 8000 funds trading at the moment, Our experts hone in on the elite of this group, about 850 funds. These money managers orchestrate bulk of the smart money’s total asset base, and by paying attention to their highest performing stock picks, Insider Monkey has found several investment strategies that have historically outrun Mr. Market. Insider Monkey’s flagship short hedge fund strategy outstripped the S&P 500 short ETFs by around 20 percentage points per annum since its inception in March 2017. Our portfolio of short stocks lost 13% since February 2017 (through November 17th) even though the market was up 65% during the same period. We just shared a list of 6 short targets in our latest quarterly update .
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. 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 website. Now let’s review the new hedge fund action regarding Luna Innovations Incorporated (NASDAQ:LUNA).
Do Hedge Funds Think LUNA Is A Good Stock To Buy Now?
At the end of the third quarter, a total of 11 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 10% from the second quarter of 2020. Below, you can check out the change in hedge fund sentiment towards LUNA over the last 21 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
When looking at the institutional investors followed by Insider Monkey, Royce & Associates, managed by Chuck Royce, holds the most valuable position in Luna Innovations Incorporated (NASDAQ:LUNA). Royce & Associates has a $11.8 million position in the stock, comprising 0.1% of its 13F portfolio. The second most bullish fund manager is Richard S. Meisenberg of ACK Asset Management, with a $8 million position; the fund has 4.1% of its 13F portfolio invested in the stock. Other members of the smart money with similar optimism contain Renaissance Technologies, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital and Cliff Asness’s AQR Capital Management. In terms of the portfolio weights assigned to each position ACK Asset Management allocated the biggest weight to Luna Innovations Incorporated (NASDAQ:LUNA), around 4.09% of its 13F portfolio. Royce & Associates is also relatively very bullish on the stock, earmarking 0.13 percent of its 13F equity portfolio to LUNA.
With a general bullishness amongst the heavyweights, specific money managers were breaking ground themselves. AQR Capital Management, managed by Cliff Asness, created the most valuable position in Luna Innovations Incorporated (NASDAQ:LUNA). AQR Capital Management had $0.2 million invested in the company at the end of the quarter. Andre F. Perold’s HighVista Strategies also initiated a $0.1 million position during the quarter. The only other fund with a new position in the stock is Gavin Saitowitz and Cisco J. del Valle’s Prelude Capital (previously Springbok Capital).
Let’s now take a look at hedge fund activity in other stocks similar to Luna Innovations Incorporated (NASDAQ:LUNA). We will take a look at VOXX International Corp (NASDAQ:VOXX), Ocwen Financial Corporation (NYSE:OCN), Quantum Corporation (NASDAQ:QMCO), Sify Technologies Limited (NASDAQ:SIFY), LiqTech International Inc (NASDAQ:LIQT), Veru Inc. (NASDAQ:VERU), and Chicken Soup for the Soul Entertainment, Inc. (NASDAQ:CSSE). This group of stocks’ market values resemble LUNA’s market value.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 5.1 hedge funds with bullish positions and the average amount invested in these stocks was $16 million. That figure was $26 million in LUNA’s case. Ocwen Financial Corporation (NYSE:OCN) is the most popular stock in this table. On the other hand Sify Technologies Limited (NASDAQ:SIFY) is the least popular one with only 2 bullish hedge fund positions. Compared to these stocks Luna Innovations Incorporated (NASDAQ:LUNA) is more popular among hedge funds. Our overall hedge fund sentiment score for LUNA is 79.6. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks returned 32.9% in 2020 through December 8th but still managed to beat the market by 16.2 percentage points. Hedge funds were also right about betting on LUNA as the stock returned 61.2% since the end of September (through 12/8) 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.