Where Do Hedge Funds Stand On Psychemedics Corp. (PMD)?

In this article you are going to find out whether hedge funds think Psychemedics Corp. (NASDAQ:PMD) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It’s not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.

Hedge fund interest in Psychemedics Corp. (NASDAQ:PMD) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that PMD 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). At the end of this article we will also compare PMD to other stocks including J. Jill, Inc. (NYSE:JILL), Midatech Pharma PLC (NASDAQ:MTP), and Charles & Colvard, Ltd. (NASDAQ:CTHR) to get a better sense of its popularity.

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

If you’d ask most shareholders, hedge funds are perceived as worthless, outdated financial tools of yesteryear. While there are greater than 8000 funds with their doors open at the moment, Our researchers choose to focus on the bigwigs of this group, around 850 funds. It is estimated that this group of investors preside over bulk of the smart money’s total capital, and by monitoring their inimitable investments, Insider Monkey has uncovered numerous investment strategies that have historically outpaced Mr. Market. Insider Monkey’s flagship short hedge fund strategy defeated the S&P 500 short ETFs by around 20 percentage points per year 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 .

Fred DiSanto Ancora Advisors

Fred DiSanto of Ancora Advisors

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 10 most profitable companies in the world 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. With all of this in mind let’s take a peek at the recent hedge fund action surrounding Psychemedics Corp. (NASDAQ:PMD).

What does smart money think about Psychemedics Corp. (NASDAQ:PMD)?

At the end of September, a total of 4 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the previous quarter. On the other hand, there were a total of 4 hedge funds with a bullish position in PMD a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Renaissance Technologies has the largest position in Psychemedics Corp. (NASDAQ:PMD), worth close to $2 million, accounting for less than 0.1%% of its total 13F portfolio. On Renaissance Technologies’s heels is Invenomic Capital Management, led by Ali Motamed, holding a $0.4 million position; 0.2% of its 13F portfolio is allocated to the stock. Remaining peers that are bullish comprise Frederick DiSanto’s Ancora Advisors, Chuck Royce’s Royce & Associates and . In terms of the portfolio weights assigned to each position Invenomic Capital Management allocated the biggest weight to Psychemedics Corp. (NASDAQ:PMD), around 0.25% of its 13F portfolio. Ancora Advisors is also relatively very bullish on the stock, earmarking 0.02 percent of its 13F equity portfolio to PMD.

Earlier we told you that the aggregate hedge fund interest in the stock was unchanged and we view this as a negative development. Even though there weren’t any hedge funds dumping their holdings during the third quarter, there weren’t any hedge funds initiating brand new positions. This indicates that hedge funds, at the very best, perceive this stock as dead money and they haven’t identified any viable catalysts that can attract investor attention.

Let’s now take a look at hedge fund activity in other stocks similar to Psychemedics Corp. (NASDAQ:PMD). These stocks are J. Jill, Inc. (NYSE:JILL), Midatech Pharma PLC (NASDAQ:MTP), Charles & Colvard, Ltd. (NASDAQ:CTHR), Navios Maritime Holdings Inc. (NYSE:NM), Sypris Solutions, Inc. (NASDAQ:SYPR), ENGlobal Corp (NASDAQ:ENG), and HTG Molecular Diagnostics, Inc. (NASDAQ:HTGM). All of these stocks’ market caps are similar to PMD’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
JILL 3 795 -5
MTP 1 275 0
CTHR 1 1314 -1
NM 2 1452 -1
SYPR 2 1013 1
ENG 2 741 1
HTGM 4 2333 0
Average 2.1 1132 -0.7

View table here if you experience formatting issues.

As you can see these stocks had an average of 2.1 hedge funds with bullish positions and the average amount invested in these stocks was $1 million. That figure was $3 million in PMD’s case. HTG Molecular Diagnostics, Inc. (NASDAQ:HTGM) is the most popular stock in this table. On the other hand Midatech Pharma PLC (NASDAQ:MTP) is the least popular one with only 1 bullish hedge fund positions. Psychemedics Corp. (NASDAQ:PMD) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for PMD is 75. 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 30.7% in 2020 through November 27th and beat the market again by 16.1 percentage points. Unfortunately PMD wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on PMD were disappointed as the stock returned -3.6% since the end of September (through 11/27) 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.