Based on the fact that hedge funds have collectively under-performed the market for several years, it would be easy to assume that their stock picks simply aren't very good. However, our research shows this not to be the case. In fact, when it comes to their very top picks collectively, they show a strong ability to pick winning stocks. This year hedge funds' top 20 stock picks easily bested the broader market, at 34.7% compared to 26.2%, despite there being a few duds in there like Berkshire Hathaway (even their collective wisdom isn't perfect). The results show that there is plenty of merit to imitating the collective wisdom of top investors.
Hedge fund interest in Misonix, Inc. (NASDAQ:MSON) 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 Allegro Merger Corp. (NASDAQ:ALGR), Evolution Petroleum Corporation (NYSE:EPM), and Griffin Industrial Realty, Inc. (NASDAQ:GRIF) to gather more data points. Our calculations also showed that MSON isn't among the 30 most popular stocks among hedge funds.
To most shareholders, hedge funds are perceived as slow, old financial vehicles of yesteryear. While there are more than 8000 funds in operation today, We look at the aristocrats of this group, about 750 funds. These investment experts oversee most of the smart money's total capital, and by monitoring their best equity investments, Insider Monkey has found a number of investment strategies that have historically beaten the market. Insider Monkey's flagship short hedge fund strategy beat the S&P 500 short ETFs by around 20 percentage points per annum since its inception in May 2014. Our portfolio of short stocks lost 27.8% since February 2017 (through November 21st) even though the market was up more than 39% during the same period. We just shared a list of 7 short targets in our latest quarterly update .
[caption id="attachment_140292" align="aligncenter" width="424"] Israel Englander of Millennium Management[/caption]
Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world's most bearish hedge fund that's more convinced than ever that a crash is coming, our long-short investment strategy doesn't rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds' buy/sell signals. We're going to take a gander at the recent hedge fund action encompassing Misonix, Inc. (NASDAQ:MSON).
What have hedge funds been doing with Misonix, Inc. (NASDAQ:MSON)?
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 one quarter earlier. By comparison, 2 hedge funds held shares or bullish call options in MSON a year ago. With hedgies' capital changing hands, there exists an "upper tier" of notable hedge fund managers who were boosting their stakes considerably (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Renaissance Technologies has the biggest position in Misonix, Inc. (NASDAQ:MSON), worth close to $4 million, amounting to less than 0.1%% of its total 13F portfolio. Sitting at the No. 2 spot is Pura Vida Investments, led by Efrem Kamen, holding a $1.9 million position; 0.7% of its 13F portfolio is allocated to the stock. In terms of the portfolio weights assigned to each position Pura Vida Investments allocated the biggest weight to Misonix, Inc. (NASDAQ:MSON), around 0.66% of its portfolio. Renaissance Technologies is also relatively very bullish on the stock, designating 0.0034 percent of its 13F equity portfolio to MSON.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Manatuck Hill Partners. One hedge fund selling its entire position doesn't always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don't think this is the case in this case because only one of the 800+ hedge funds tracked by Insider Monkey identified as a viable investment and initiated a position in the stock (that fund was Millennium Management).
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Misonix, Inc. (NASDAQ:MSON) but similarly valued. These stocks are Allegro Merger Corp. (NASDAQ:ALGR), Evolution Petroleum Corporation (NYSE:EPM), Griffin Land & Nurseries, Inc. (NASDAQ:GRIF), and Standard Diversified Inc. (NYSE:SDI). This group of stocks' market caps match MSON's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ALGR,11,23423,0 EPM,12,20409,-2 GRIF,2,27297,0 SDI,4,4190,0 Average,7.25,18830,-0.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 7.25 hedge funds with bullish positions and the average amount invested in these stocks was $19 million. That figure was $6 million in MSON's case. Evolution Petroleum Corporation (NYSE:EPM) is the most popular stock in this table. On the other hand Griffin Land & Nurseries, Inc. (NASDAQ:GRIF) is the least popular one with only 2 bullish hedge fund positions. Misonix, Inc. (NASDAQ:MSON) 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 34.7% in 2019 through November 22nd and outperformed the S&P 500 ETF (SPY) by 8.5 percentage points. A small number of hedge funds were also right about betting on MSON, though not to the same extent, as the stock returned 6.5% during the fourth quarter (through 11/22) and outperformed the market.
Disclosure: None. This article was originally published at Insider Monkey.