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Did Hedge Funds Drop The Ball On Kamada Ltd (KMDA) ?

Nina Todic

We are still in an overall bull market and many stocks that smart money investors were piling into surged through November 22nd. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 52% and 49% respectively. Hedge funds' top 3 stock picks returned 39.1% this year and beat the S&P 500 ETFs by nearly 13 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 Kamada Ltd (NASDAQ:KMDA).

Hedge fund interest in Kamada Ltd (NASDAQ:KMDA) 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 Asanko Gold Inc (NYSE:AKG), Chiasma Inc (NASDAQ:CHMA), and KalVista Pharmaceuticals, Inc. (NASDAQ:KALV) to gather more data points. Our calculations also showed that KMDA isn't among the 30 most popular stocks among hedge funds.

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 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 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.

[caption id="attachment_746893" align="aligncenter" width="473"] Paul Marshall of Marshall Wace[/caption]

Paul Marshall Marshall Wace

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 glance at the fresh hedge fund action surrounding Kamada Ltd (NASDAQ:KMDA).

How have hedgies been trading Kamada Ltd (NASDAQ:KMDA)?

At the end of the third quarter, a total of 3 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the second quarter of 2019. The graph below displays the number of hedge funds with bullish position in KMDA over the last 17 quarters. With hedge funds' positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were adding to their holdings considerably (or already accumulated large positions).

No of Hedge Funds with KMDA Positions

According to Insider Monkey's hedge fund database, Renaissance Technologies holds the number one position in Kamada Ltd (NASDAQ:KMDA). Renaissance Technologies has a $4.3 million position in the stock, comprising less than 0.1%% of its 13F portfolio. The second largest stake is held by Marshall Wace, managed by Paul Marshall and Ian Wace, which holds a $0.1 million position; less than 0.1%% of its 13F portfolio is allocated to the company. In terms of the portfolio weights assigned to each position Engine Capital allocated the biggest weight to Kamada Ltd (NASDAQ:KMDA), around 0.03% of its portfolio. Renaissance Technologies is also relatively very bullish on the stock, designating 0.0036 percent of its 13F equity portfolio to KMDA.

Earlier we told you that the aggregate hedge fund interest in the stock was unchanged and we view this as a negative development. Even though there weren't any hedge funds dumping their holdings during the third quarter, there weren't any hedge funds initiating brand new positions. This indicates that hedge funds, at the very best, perceive this stock as dead money and they haven't identified any viable catalysts that can attract investor attention.

Let's now review hedge fund activity in other stocks similar to Kamada Ltd (NASDAQ:KMDA). We will take a look at Asanko Gold Inc (NYSE:AKG), Chiasma Inc (NASDAQ:CHMA), KalVista Pharmaceuticals, Inc. (NASDAQ:KALV), and Viveve Medical, Inc. (NASDAQ:VIVE). This group of stocks' market values resemble KMDA's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position AKG,5,28345,-1 CHMA,11,52816,4 KALV,15,59982,0 VIVE,1,3,-2 Average,8,35287,0.25 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 8 hedge funds with bullish positions and the average amount invested in these stocks was $35 million. That figure was $4 million in KMDA's case. KalVista Pharmaceuticals, Inc. (NASDAQ:KALV) is the most popular stock in this table. On the other hand Viveve Medical, Inc. (NASDAQ:VIVE) is the least popular one with only 1 bullish hedge fund positions. Kamada Ltd (NASDAQ:KMDA) 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 KMDA as the stock returned 34.5% during Q4 (through 11/22) and outperformed the market by an even larger margin.

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

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