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Is Accuray Incorporated (ARAY) A Good Stock To Buy?

Reymerlyn Martin

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We have processed the filings of the more than 700 world-class investment firms that we track and now have access to the collective wisdom contained in these filings, which are based on their March 31 holdings, data that is available nowhere else. Should you consider Accuray Incorporated (NASDAQ:ARAY) for your portfolio? We'll look to this invaluable collective wisdom for the answer.

Accuray Incorporated (NASDAQ:ARAY) investors should pay attention to a decrease in hedge fund interest of late. ARAY was in 15 hedge funds' portfolios at the end of the first quarter of 2019. There were 17 hedge funds in our database with ARAY holdings at the end of the previous quarter. Our calculations also showed that ARAY isn't among the 30 most popular stocks among hedge funds.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's flagship best performing hedge funds strategy returned 25.8% year to date (through May 30th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 40 percentage points since its inception (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Paul Marshall Marshall Wace

We're going to review the fresh hedge fund action regarding Accuray Incorporated (NASDAQ:ARAY).

What have hedge funds been doing with Accuray Incorporated (NASDAQ:ARAY)?

At Q1's end, a total of 15 of the hedge funds tracked by Insider Monkey were long this stock, a change of -12% from the fourth quarter of 2018. The graph below displays the number of hedge funds with bullish position in ARAY over the last 15 quarters. With hedgies' sentiment swirling, there exists a select group of notable hedge fund managers who were boosting their stakes meaningfully (or already accumulated large positions).

ARAY_jun2019

Among these funds, Renaissance Technologies held the most valuable stake in Accuray Incorporated (NASDAQ:ARAY), which was worth $25.6 million at the end of the first quarter. On the second spot was Archon Capital Management which amassed $15.2 million worth of shares. Moreover, D E Shaw, Royce & Associates, and Marshall Wace LLP were also bullish on Accuray Incorporated (NASDAQ:ARAY), allocating a large percentage of their portfolios to this stock.

Judging by the fact that Accuray Incorporated (NASDAQ:ARAY) has faced bearish sentiment from the smart money, it's safe to say that there was a specific group of money managers who sold off their positions entirely in the third quarter. It's worth mentioning that Vishal Saluja and Pham Quang's Endurant Capital Management dumped the largest investment of the "upper crust" of funds followed by Insider Monkey, comprising close to $1.6 million in stock, and Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital was right behind this move, as the fund sold off about $0.7 million worth. These moves are important to note, as aggregate hedge fund interest was cut by 2 funds in the third quarter.

Let's also examine hedge fund activity in other stocks similar to Accuray Incorporated (NASDAQ:ARAY). These stocks are Veritiv Corp (NYSE:VRTV), Limoneira Company (NASDAQ:LMNR), Cellcom Israel Ltd. (NYSE:CEL), and Hibbett Sports, Inc. (NASDAQ:HIBB). This group of stocks' market values match ARAY's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position VRTV,12,101897,2 LMNR,2,8529,-2 CEL,2,14426,0 HIBB,15,113528,0 Average,7.75,59595,0 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 7.75 hedge funds with bullish positions and the average amount invested in these stocks was $60 million. That figure was $89 million in ARAY's case. Hibbett Sports, Inc. (NASDAQ:HIBB) is the most popular stock in this table. On the other hand Limoneira Company (NASDAQ:LMNR) is the least popular one with only 2 bullish hedge fund positions. Accuray Incorporated (NASDAQ:ARAY) is not the most popular stock in this group but hedge fund interest is still above average. 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 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. Unfortunately ARAY wasn't nearly as popular as these 20 stocks and hedge funds that were betting on ARAY were disappointed as the stock returned -19.9% during the same period 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 13 of these stocks already outperformed the market so far in Q2.

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

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