Concerns over rising interest rates and expected further rate increases have hit several stocks hard during the fourth quarter of 2018. Trends reversed 180 degrees in 2019 amid Powell's pivot and optimistic expectations towards a trade deal with China. Hedge funds and institutional investors tracked by Insider Monkey usually invest a disproportionate amount of their portfolios in smaller cap stocks. We have been receiving indications that hedge funds were increasing their overall exposure in the third quarter and this is one of the factors behind the recent movements in major indices. In this article, we will take a closer look at hedge fund sentiment towards Aevi Genomic Medicine, Inc. (NASDAQ:GNMX).
Hedge fund interest in Aevi Genomic Medicine, Inc. (NASDAQ:GNMX) shares was flat at the end of last quarter. This is usually a negative indicator. The level and the change in hedge fund popularity aren't the only variables you need to analyze to decipher hedge funds' perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That's why at the end of this article we will examine companies such as Jason Industries Inc (NASDAQ:JASN), Ameri Holdings, Inc. (NASDAQ:AMRH), and IZEA Inc. (NASDAQ:IZEA) to gather more data points. Our calculations also showed that GNMX isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 Russell 2000 ETFs by 40 percentage points since May 2014 (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. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
[caption id="attachment_26073" align="alignnone" width="600"] Jim Simons of Renaissance Technologies[/caption]
We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, "I'm investing more today than I did back in early 2009." So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius' weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager's investor letter and the stock already gained 20 percent. Keeping this in mind let's take a look at the new hedge fund action encompassing Aevi Genomic Medicine, Inc. (NASDAQ:GNMX).
What does smart money think about Aevi Genomic Medicine, Inc. (NASDAQ:GNMX)?
At Q3's end, a total of 3 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards GNMX over the last 17 quarters. So, let's find out 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, Renaissance Technologies, holds the most valuable position in Aevi Genomic Medicine, Inc. (NASDAQ:GNMX). Renaissance Technologies has a $0.4 million position in the stock, comprising less than 0.1%% of its 13F portfolio. Sitting at the No. 2 spot is Citadel Investment Group, managed by Ken Griffin, which holds a $0 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. In terms of the portfolio weights assigned to each position Birchview Capital allocated the biggest weight to Aevi Genomic Medicine, Inc. (NASDAQ:GNMX), around 0.01% of its 13F portfolio. Renaissance Technologies is also relatively very bullish on the stock, earmarking 0.0003 percent of its 13F equity portfolio to GNMX.
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 go over hedge fund activity in other stocks - not necessarily in the same industry as Aevi Genomic Medicine, Inc. (NASDAQ:GNMX) but similarly valued. These stocks are Jason Industries Inc (NASDAQ:JASN), Ameri Holdings, Inc. (NASDAQ:AMRH), IZEA Inc. (NASDAQ:IZEA), and Genetic Technologies Limited (NASDAQ:GENE). All of these stocks' market caps are similar to GNMX's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position JASN,4,2289,-1 AMRH,1,33,0 IZEA,1,126,-1 GENE,1,214,-1 Average,1.75,666,-0.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 1.75 hedge funds with bullish positions and the average amount invested in these stocks was $1 million. That figure was $0 million in GNMX's case. Jason Industries Inc (NASDAQ:JASN) is the most popular stock in this table. On the other hand Ameri Holdings, Inc. (NASDAQ:AMRH) is the least popular one with only 1 bullish hedge fund positions. Aevi Genomic Medicine, Inc. (NASDAQ:GNMX) 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 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately GNMX wasn't nearly as popular as these 20 stocks and hedge funds that were betting on GNMX were disappointed as the stock returned -20% during the fourth quarter (through the end of November) 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.
Disclosure: None. This article was originally published at Insider Monkey.