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 TransAct Technologies Incorporated (NASDAQ:TACT).
Hedge fund interest in TransAct Technologies Incorporated (NASDAQ:TACT) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that TACT 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 TACT to other stocks including Global Self Storage, Inc. (NASDAQ:SELF), Oncternal Therapeutics, Inc. (NASDAQ:ONCT), and FSD Pharma Inc. (NASDAQ:HUGE) to get a better sense of its popularity.
Video: Watch our video about the top 5 most popular hedge fund stocks.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 66 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
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. Now we’re going to view the latest hedge fund action encompassing TransAct Technologies Incorporated (NASDAQ:TACT).
Hedge fund activity in TransAct Technologies Incorporated (NASDAQ:TACT)
Heading into the fourth quarter of 2020, a total of 4 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the second quarter of 2020. By comparison, 5 hedge funds held shares or bullish call options in TACT a year ago. So, let’s examine 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, Raymond J. Harbert’s Harbert Management has the largest position in TransAct Technologies Incorporated (NASDAQ:TACT), worth close to $2.6 million, accounting for 3.1% of its total 13F portfolio. On Harbert Management’s heels is Renaissance Technologies, holding a $2 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Some other professional money managers with similar optimism encompass Mario Gabelli’s GAMCO Investors, Chuck Royce’s Royce & Associates and . In terms of the portfolio weights assigned to each position Harbert Management allocated the biggest weight to TransAct Technologies Incorporated (NASDAQ:TACT), around 3.14% of its 13F portfolio. GAMCO Investors is also relatively very bullish on the stock, designating 0.0044 percent of its 13F equity portfolio to TACT.
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 review hedge fund activity in other stocks – not necessarily in the same industry as TransAct Technologies Incorporated (NASDAQ:TACT) but similarly valued. These stocks are Global Self Storage, Inc. (NASDAQ:SELF), Oncternal Therapeutics, Inc. (NASDAQ:ONCT), FSD Pharma Inc. (NASDAQ:HUGE), Air Industries Group (NYSE:AIRI), Kaixin Auto Holdings (NASDAQ:KXIN), CSP Inc. (NASDAQ:CSPI), and Fuling Global Inc. (NASDAQ:FORK). This group of stocks’ market caps are similar to TACT’s market cap.
|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 1.6 hedge funds with bullish positions and the average amount invested in these stocks was $1 million. That figure was $5 million in TACT’s case. Oncternal Therapeutics, Inc. (NASDAQ:ONCT) is the most popular stock in this table. On the other hand Global Self Storage, Inc. (NASDAQ:SELF) is the least popular one with only 1 bullish hedge fund positions. TransAct Technologies Incorporated (NASDAQ:TACT) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for TACT is 62.5. 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 gained 30.7% in 2020 through November 27th and still beat the market by 16.1 percentage points. Hedge funds were also right about betting on TACT as the stock returned 74.2% since the end of Q3 (through 11/27) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.