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Should You Buy BioTelemetry, Inc. (BEAT)?

Debasis Saha

We are still in an overall bull market and many stocks that smart money investors were piling into surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Hedge funds' top 3 stock picks returned 41.7% this year and beat the S&P 500 ETFs by 14 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That's why we believe it isn't a waste of time to check out hedge fund sentiment before you invest in a stock like BioTelemetry, Inc. (NASDAQ:BEAT).

BioTelemetry, Inc. (NASDAQ:BEAT) shares haven't seen a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 16 hedge funds' portfolios at the end of September. 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 NIC Inc. (NASDAQ:EGOV), Arcos Dorados Holding Inc (NYSE:ARCO), and Universal Corp (NYSE:UVV) to gather more data points. Our calculations also showed that BEAT 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.

5 Most Popular Stocks Among Hedge Funds

To the average investor there are tons of gauges market participants employ to value their holdings. A duo of the less utilized gauges are hedge fund and insider trading interest. We have shown that, historically, those who follow the best picks of the elite money managers can beat the S&P 500 by a healthy amount (see the details here).

[caption id="attachment_193003" align="alignnone" width="600"] Chuck Royce of Royce & Associates[/caption]

Chuck Royce

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. We're going to go over the fresh hedge fund action regarding BioTelemetry, Inc. (NASDAQ:BEAT).

Hedge fund activity in BioTelemetry, Inc. (NASDAQ:BEAT)

Heading into the fourth quarter of 2019, a total of 16 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in BEAT over the last 17 quarters. With hedge funds' sentiment swirling, there exists a select group of key hedge fund managers who were adding to their holdings considerably (or already accumulated large positions).

Is BEAT A Good Stock To Buy?

The largest stake in BioTelemetry, Inc. (NASDAQ:BEAT) was held by Royce & Associates, which reported holding $10.7 million worth of stock at the end of September. It was followed by Sio Capital with a $7.8 million position. Other investors bullish on the company included Ancora Advisors, Citadel Investment Group, and GLG Partners. In terms of the portfolio weights assigned to each position Sio Capital allocated the biggest weight to BioTelemetry, Inc. (NASDAQ:BEAT), around 2.51% of its 13F portfolio. Lyon Street Capital is also relatively very bullish on the stock, setting aside 1.86 percent of its 13F equity portfolio to BEAT.

Seeing as BioTelemetry, Inc. (NASDAQ:BEAT) has experienced bearish sentiment from hedge fund managers, logic holds that there lies a certain "tier" of funds that elected to cut their entire stakes by the end of the third quarter. Intriguingly, Donald Sussman's Paloma Partners said goodbye to the largest investment of all the hedgies watched by Insider Monkey, valued at close to $0.3 million in stock, and Paul Tudor Jones's Tudor Investment Corp was right behind this move, as the fund said goodbye to about $0.3 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).

Let's go over hedge fund activity in other stocks - not necessarily in the same industry as BioTelemetry, Inc. (NASDAQ:BEAT) but similarly valued. We will take a look at NIC Inc. (NASDAQ:EGOV), Arcos Dorados Holding Inc (NYSE:ARCO), Universal Corp (NYSE:UVV), and Cardtronics plc (NASDAQ:CATM). This group of stocks' market values resemble BEAT's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position EGOV,20,113155,3 ARCO,14,118648,0 UVV,15,110979,-3 CATM,19,351967,0 Average,17,173687,0 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 17 hedge funds with bullish positions and the average amount invested in these stocks was $174 million. That figure was $40 million in BEAT's case. NIC Inc. (NASDAQ:EGOV) is the most popular stock in this table. On the other hand Arcos Dorados Holding Inc (NYSE:ARCO) is the least popular one with only 14 bullish hedge fund positions. BioTelemetry, Inc. (NASDAQ:BEAT) is not the least popular stock in this group but hedge fund interest is still below average. 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. A small number of hedge funds were also right about betting on BEAT as the stock returned 13.7% during the first two months of Q4 and outperformed the market by an even larger margin.

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

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