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Did Hedge Funds Make The Right Call On IMAX Corporation (IMAX) ?

Abigail Fisher
·5 mins read

We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn't mean that they don't have occasional colossal losses; they do. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards IMAX Corporation (NYSE:IMAX) and determine whether hedge funds skillfully traded this stock.

IMAX Corporation (NYSE:IMAX) investors should be aware of an increase in enthusiasm from smart money recently. Our calculations also showed that IMAX isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks). Video: Watch our video about the top 5 most popular hedge fund stocks.

In the eyes of most market participants, hedge funds are assumed to be unimportant, old investment tools of yesteryear. While there are more than 8000 funds with their doors open at present, We look at the moguls of this group, approximately 850 funds. These hedge fund managers administer most of all hedge funds' total capital, and by watching their finest investments, Insider Monkey has deciphered various investment strategies that have historically outrun the broader indices. Insider Monkey's flagship short hedge fund strategy beat the S&P 500 short ETFs by around 20 percentage points a year since its inception in March 2017. Our portfolio of short stocks lost 36% since February 2017 (through May 18th) even though the market was up 30% during the same period. We just shared a list of 8 short targets in our latest quarterly update .

Peter Rathjens Arrowstreet Capital 394
Peter Rathjens Arrowstreet Capital 394

Peter Rathjens of Arrowstreet Capital

At Insider Monkey we scour multiple sources to uncover the next great investment idea. With Federal Reserve creating trillions of dollars out of thin air, we believe gold prices will keep increasing. So, we are checking out gold stocks like this small gold mining company. We go through lists like the 10 most profitable companies in America 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 let's check out the key hedge fund action surrounding IMAX Corporation (NYSE:IMAX).

How have hedgies been trading IMAX Corporation (NYSE:IMAX)?

At the end of the first quarter, a total of 17 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 21% from the fourth quarter of 2019. The graph below displays the number of hedge funds with bullish position in IMAX over the last 18 quarters. With hedge funds' capital changing hands, there exists a few notable hedge fund managers who were upping their holdings considerably (or already accumulated large positions).

The largest stake in IMAX Corporation (NYSE:IMAX) was held by Renaissance Technologies, which reported holding $12.1 million worth of stock at the end of September. It was followed by Marshall Wace LLP with a $7.6 million position. Other investors bullish on the company included Arrowstreet Capital, Private Capital Management, and Two Sigma Advisors. In terms of the portfolio weights assigned to each position Voce Capital allocated the biggest weight to IMAX Corporation (NYSE:IMAX), around 1.13% of its 13F portfolio. Private Capital Management is also relatively very bullish on the stock, dishing out 0.91 percent of its 13F equity portfolio to IMAX.

Now, key hedge funds were breaking ground themselves. Marshall Wace LLP, managed by Paul Marshall and Ian Wace, initiated the most outsized position in IMAX Corporation (NYSE:IMAX). Marshall Wace LLP had $7.6 million invested in the company at the end of the quarter. Gregg J. Powers's Private Capital Management also initiated a $2.9 million position during the quarter. The following funds were also among the new IMAX investors: J. Daniel Plants's Voce Capital, Ken Griffin's Citadel Investment Group, and Minhua Zhang's Weld Capital Management.

Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as IMAX Corporation (NYSE:IMAX) but similarly valued. We will take a look at Premier Financial Corp. (NASDAQ:FDEF), Oi SA (NYSE:OIBR), Vanda Pharmaceuticals Inc. (NASDAQ:VNDA), and Meredith Corporation (NYSE:MDP). This group of stocks' market values are closest to IMAX's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position FDEF,10,40954,1 OIBR,8,58613,-4 VNDA,20,178955,0 MDP,16,81509,-2 Average,13.5,90008,-1.25 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 13.5 hedge funds with bullish positions and the average amount invested in these stocks was $90 million. That figure was $39 million in IMAX's case. Vanda Pharmaceuticals Inc. (NASDAQ:VNDA) is the most popular stock in this table. On the other hand Oi SA (NYSE:OIBR) is the least popular one with only 8 bullish hedge fund positions. IMAX Corporation (NYSE:IMAX) 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 IMAX as the stock returned 39.7% since Q1 and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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

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