Where Do Hedge Funds Stand On Profound Medical Corp. (PROF)?

In this article we are going to use hedge fund sentiment as a tool and determine whether Profound Medical Corp. (NASDAQ:PROF) is a good investment right now. We like to analyze hedge fund sentiment before conducting days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy League graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments and it is a fact that hedge funds’ picks don’t beat the market 100% of the time, but their consensus picks have historically done very well and have outperformed the market after adjusting for risk.

Profound Medical Corp. (NASDAQ:PROF) investors should be aware of an increase in support from the world’s most elite money managers lately. Profound Medical Corp. (NASDAQ:PROF) was in 13 hedge funds’ portfolios at the end of September. The all time high for this statistic is 10. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. There were 10 hedge funds in our database with PROF holdings at the end of June. Our calculations also showed that PROF 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 21st century investor’s toolkit there are a lot of indicators stock market investors employ to value publicly traded companies. Some of the less known indicators are hedge fund and insider trading indicators. Our experts have shown that, historically, those who follow the top picks of the elite hedge fund managers can outclass the S&P 500 by a significant amount (see the details here).

James Flynn Deerfield Management

James E. Flynn of Deerfield Management

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 view the new hedge fund action regarding Profound Medical Corp. (NASDAQ:PROF).

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

At Q3’s end, a total of 13 of the hedge funds tracked by Insider Monkey were long this stock, a change of 30% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards PROF over the last 21 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in Profound Medical Corp. (NASDAQ:PROF) was held by Redmile Group, which reported holding $14.6 million worth of stock at the end of September. It was followed by Pura Vida Investments with a $13.8 million position. Other investors bullish on the company included Deerfield Management, Park West Asset Management, and Blackcrane Capital. In terms of the portfolio weights assigned to each position Blackcrane Capital allocated the biggest weight to Profound Medical Corp. (NASDAQ:PROF), around 8.11% of its 13F portfolio. Pura Vida Investments is also relatively very bullish on the stock, dishing out 0.71 percent of its 13F equity portfolio to PROF.

As one would reasonably expect, some big names have been driving this bullishness. Deerfield Management, managed by James E. Flynn, established the most outsized position in Profound Medical Corp. (NASDAQ:PROF). Deerfield Management had $12.3 million invested in the company at the end of the quarter. Peter S. Park’s Park West Asset Management also initiated a $7.9 million position during the quarter. The other funds with brand new PROF positions are Greg Martinez’s Parkman Healthcare Partners and Ken Griffin’s Citadel Investment Group.

Let’s also examine hedge fund activity in other stocks similar to Profound Medical Corp. (NASDAQ:PROF). These stocks are Carrols Restaurant Group, Inc. (NASDAQ:TAST), Ethan Allen Interiors Inc. (NYSE:ETH), Central Puerto S.A. (NYSE:CEPU), Triumph Group Inc (NYSE:TGI), Kandi Technolgies Group Inc. (NASDAQ:KNDI), VSE Corporation (NASDAQ:VSEC), and Pandion Therapeutics Inc. (NASDAQ:PAND). All of these stocks’ market caps resemble PROF’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
TAST 12 34784 0
ETH 15 40292 2
CEPU 2 4910 -2
TGI 13 43185 -1
KNDI 1 310 -1
VSEC 3 2324 1
PAND 14 68560 14
Average 8.6 27766 1.9

View table here if you experience formatting issues.

As you can see these stocks had an average of 8.6 hedge funds with bullish positions and the average amount invested in these stocks was $28 million. That figure was $60 million in PROF’s case. Ethan Allen Interiors Inc. (NYSE:ETH) is the most popular stock in this table. On the other hand Kandi Technolgies Group Inc. (NASDAQ:KNDI) is the least popular one with only 1 bullish hedge fund positions. Profound Medical Corp. (NASDAQ:PROF) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for PROF is 80.9. 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. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. 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 gained 32.9% in 2020 through December 8th and beat the market again by 16.2 percentage points. Unfortunately PROF wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on PROF were disappointed as the stock returned 4% since the end of September (through 12/8) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.

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