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How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don't always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding Anika Therapeutics, Inc. (NASDAQ:ANIK) and determine whether hedge funds had an edge regarding this stock.
Hedge fund interest in Anika Therapeutics, Inc. (NASDAQ:ANIK) shares was flat at the end of last quarter. This is usually a negative indicator. At the end of this article we will also compare ANIK to other stocks including GoPro Inc (NASDAQ:GPRO), Banco Latinoamericano de Comercio Exterior, S.A. (NYSE:BLX), and American Axle & Manufacturing Holdings, Inc. (NYSE:AXL) to get a better sense of its popularity.
Video: Watch our video about the top 5 most popular hedge fund stocks.
Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. 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 S&P 500 ETFs by 58 percentage points since March 2017 (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.
Jeffrey Bronchick of Cove Street Capital
At Insider Monkey we scour multiple sources to uncover the next great investment idea. Cannabis stocks are roaring back in 2020, so we are checking out this under-the-radar stock. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. Now we're going to take a look at the latest hedge fund action surrounding Anika Therapeutics, Inc. (NASDAQ:ANIK).
How have hedgies been trading Anika Therapeutics, Inc. (NASDAQ:ANIK)?
Heading into the second quarter of 2020, a total of 19 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards ANIK over the last 18 quarters. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to Insider Monkey's hedge fund database, Renaissance Technologies has the largest position in Anika Therapeutics, Inc. (NASDAQ:ANIK), worth close to $21.6 million, accounting for less than 0.1%% of its total 13F portfolio. On Renaissance Technologies's heels is D E Shaw, managed by D. E. Shaw, which holds a $6.9 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Other professional money managers that are bullish encompass Cliff Asness's AQR Capital Management, John Overdeck and David Siegel's Two Sigma Advisors and Ken Griffin's Citadel Investment Group. In terms of the portfolio weights assigned to each position Diker Management allocated the biggest weight to Anika Therapeutics, Inc. (NASDAQ:ANIK), around 0.27% of its 13F portfolio. Cove Street Capital is also relatively very bullish on the stock, designating 0.12 percent of its 13F equity portfolio to ANIK.
Because Anika Therapeutics, Inc. (NASDAQ:ANIK) has experienced declining sentiment from hedge fund managers, it's easy to see that there lies a certain "tier" of money managers who were dropping their entire stakes in the first quarter. Interestingly, Paul Tudor Jones's Tudor Investment Corp cut the biggest position of the 750 funds tracked by Insider Monkey, totaling an estimated $1.6 million in stock, and Michael Gelband's ExodusPoint Capital was right behind this move, as the fund cut about $0.6 million worth. These moves are interesting, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Anika Therapeutics, Inc. (NASDAQ:ANIK) but similarly valued. These stocks are GoPro Inc (NASDAQ:GPRO), Banco Latinoamericano de Comercio Exterior, S.A. (NYSE:BLX), American Axle & Manufacturing Holdings, Inc. (NYSE:AXL), and Bank of Marin Bancorp (NASDAQ:BMRC). This group of stocks' market caps are closest to ANIK's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position GPRO,9,199300,-1 BLX,3,30130,0 AXL,22,44333,-1 BMRC,6,13433,0 Average,10,71799,-0.5 [/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 $72 million. That figure was $49 million in ANIK's case. American Axle & Manufacturing Holdings, Inc. (NYSE:AXL) is the most popular stock in this table. On the other hand Banco Latinoamericano de Comercio Exterior, S.A. (NYSE:BLX) is the least popular one with only 3 bullish hedge fund positions. Anika Therapeutics, Inc. (NASDAQ:ANIK) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 18.6% in 2020 through July 27th but still beat the market by 17.1 percentage points. Hedge funds were also right about betting on ANIK, though not to the same extent, as the stock returned 27.5% since the end of March and outperformed the market as well.
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Disclosure: None. This article was originally published at Insider Monkey.