"Since 2006, value stocks (IVE vs IVW) have underperformed 11 of the 13 calendar years and when they beat growth, it wasn't by much. Cumulatively, through this week, it has been a 122% differential (up 52% for value vs up 174% for growth). This appears to be the longest and most severe drought for value investors since data collection began. It will go our way eventually as there are too many people paying far too much for today's darlings, both public and private. Further, the ten-year yield of 2.5% (pre-tax) isn't attractive nor is real estate. We believe the value part of the global equity market is the only place to earn solid risk adjusted returns and we believe those returns will be higher than normal," said Vilas Fund in its Q1 investor letter. We aren't sure whether value stocks outperform growth, but we follow hedge fund investor letters to understand where the markets and stocks might be going. This article will lay out and discuss the hedge fund and institutional investor sentiment towards Health Insurance Innovations Inc (NASDAQ:HIIQ).
Health Insurance Innovations Inc (NASDAQ:HIIQ) has seen a decrease in support from the world's most elite money managers recently. Our calculations also showed that HIIQ 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.
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 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'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.8% through November 21, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
[caption id="attachment_262336" align="alignnone" width="600"] J. Carlo Cannell of Cannell Capital[/caption]
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world's largest cannabis market, so we check out this European marijuana stock pitch. 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 also rely on the best performing hedge funds' buy/sell signals. Let's take a look at the latest hedge fund action regarding Health Insurance Innovations Inc (NASDAQ:HIIQ).
What does smart money think about Health Insurance Innovations Inc (NASDAQ:HIIQ)?
At Q3's end, a total of 15 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -21% from the previous quarter. On the other hand, there were a total of 17 hedge funds with a bullish position in HIIQ 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.
More specifically, Cannell Capital was the largest shareholder of Health Insurance Innovations Inc (NASDAQ:HIIQ), with a stake worth $26.1 million reported as of the end of September. Trailing Cannell Capital was P2 Capital Partners, which amassed a stake valued at $20.7 million. Cardinal Capital, Millennium Management, and Springbok Capital were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Capital Returns Management allocated the biggest weight to Health Insurance Innovations Inc (NASDAQ:HIIQ), around 8.66% of its 13F portfolio. Cannell Capital is also relatively very bullish on the stock, setting aside 8.45 percent of its 13F equity portfolio to HIIQ.
Seeing as Health Insurance Innovations Inc (NASDAQ:HIIQ) has witnessed falling interest from the aggregate hedge fund industry, we can see that there were a few money managers that slashed their full holdings by the end of the third quarter. Intriguingly, Dennis Puri and Oliver Keller's Hunt Lane Capital said goodbye to the biggest position of all the hedgies followed by Insider Monkey, comprising about $22 million in stock, and Sahm Adrangi's Kerrisdale Capital was right behind this move, as the fund cut about $0.7 million worth. These transactions are important to note, as aggregate hedge fund interest dropped by 4 funds by the end of the third quarter.
Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Health Insurance Innovations Inc (NASDAQ:HIIQ) but similarly valued. We will take a look at DURECT Corporation (NASDAQ:DRRX), Ladenburg Thalmann Financial Services (NYSEAMEX:LTS), Clarus Corporation (NASDAQ:CLAR), and Limelight Networks, Inc. (NASDAQ:LLNW). All of these stocks' market caps match HIIQ's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position DRRX,9,44901,4 LTS,6,2560,1 CLAR,12,47803,-2 LLNW,13,40097,2 Average,10,33840,1.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 10 hedge funds with bullish positions and the average amount invested in these stocks was $34 million. That figure was $91 million in HIIQ's case. Limelight Networks, Inc. (NASDAQ:LLNW) is the most popular stock in this table. On the other hand Ladenburg Thalmann Financial Services (NYSEAMEX:LTS) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks Health Insurance Innovations Inc (NASDAQ:HIIQ) is more popular among hedge funds. 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 HIIQ wasn't nearly as popular as these 20 stocks and hedge funds that were betting on HIIQ were disappointed as the stock returned -27.9% during the first two months of the fourth 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 70 percent of these stocks already outperformed the market in Q4.
Disclosure: None. This article was originally published at Insider Monkey.