Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips or bumps on the charts, usually don't make them change their opinion towards a company. This time it may be different. During the fourth quarter of 2018 we observed increased volatility and small-cap stocks underperformed the market. Things completely reversed during the first half of 2019. Hedge fund investor letters indicated that they are cutting their overall exposure, closing out some position and doubling down on others. Let’s take a look at the hedge fund sentiment towards Atrion Corporation (NASDAQ:ATRI) to find out whether it was one of their high conviction long-term ideas.
Is Atrion Corporation (NASDAQ:ATRI) undervalued? Hedge funds are in a bullish mood. The number of bullish hedge fund bets increased by 3 lately. Our calculations also showed that ATRI isn't among the 30 most popular stocks among hedge funds (see the video below). ATRI was in 11 hedge funds' portfolios at the end of the second quarter of 2019. There were 8 hedge funds in our database with ATRI positions at the end of the previous quarter. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 25.7% through September 30, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn't rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let's take a peek at the fresh hedge fund action encompassing Atrion Corporation (NASDAQ:ATRI).
What does smart money think about Atrion Corporation (NASDAQ:ATRI)?
At the end of the second quarter, a total of 11 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 38% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards ATRI over the last 16 quarters. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Atrion Corporation (NASDAQ:ATRI) was held by Renaissance Technologies, which reported holding $51.9 million worth of stock at the end of March. It was followed by Royce & Associates with a $30.6 million position. Other investors bullish on the company included Citadel Investment Group, Marshall Wace LLP, and AQR Capital Management.
As aggregate interest increased, key money managers were leading the bulls' herd. Marshall Wace LLP, managed by Paul Marshall and Ian Wace, created the most valuable position in Atrion Corporation (NASDAQ:ATRI). Marshall Wace LLP had $2.4 million invested in the company at the end of the quarter. Michael Gelband's ExodusPoint Capital also made a $0.6 million investment in the stock during the quarter. The only other fund with a brand new ATRI position is Paul Tudor Jones's Tudor Investment Corp.
Let's check out hedge fund activity in other stocks similar to Atrion Corporation (NASDAQ:ATRI). We will take a look at Dillard's, Inc. (NYSE:DDS), Mueller Water Products, Inc. (NYSE:MWA), World Acceptance Corporation (NASDAQ:WRLD), and Skyline Champion Corporation (NYSE:SKY). This group of stocks' market valuations match ATRI's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position DDS,20,207603,-8 MWA,18,246157,0 WRLD,11,279010,-2 SKY,25,258382,1 Average,18.5,247788,-2.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 18.5 hedge funds with bullish positions and the average amount invested in these stocks was $248 million. That figure was $96 million in ATRI's case. Skyline Champion Corporation (NYSE:SKY) is the most popular stock in this table. On the other hand World Acceptance Corporation (NASDAQ:WRLD) is the least popular one with only 11 bullish hedge fund positions. Compared to these stocks Atrion Corporation (NASDAQ:ATRI) is even less popular than WRLD. Hedge funds dodged a bullet by taking a bearish stance towards ATRI. Our calculations showed that the top 20 most popular hedge fund stocks returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately ATRI wasn't nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); ATRI investors were disappointed as the stock returned -8.4% during the third quarter 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 in 2019.
Disclosure: None. This article was originally published at Insider Monkey.