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Did Hedge Funds Drop The Ball On inTEST Corporation (INTT) ?

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Before putting in our own effort and resources into finding a good investment, we can quickly utilize hedge fund expertise to give us a quick glimpse of whether that stock could make for a good addition to our portfolios. The odds are not exactly stacked in investors' favor when it comes to beating the market, as evidenced by the fact that less than 49% of the stocks in the S&P 500 did so during the third quarter. The stats were even worse in recent years when most of the advances in the market were due to large gains by FAANG stocks. However, one bright side for individual investors was the strong performance of hedge funds' top consensus picks. This year hedge funds' top 20 stock picks outperformed the S&P 500 Index by 8.5 percentage points through November 22nd. Thus, we can see that the tireless research and efforts of hedge funds to identify winning stocks can work to our advantage when we know how to use the data. While not all of their picks will be winners, our odds are much better following their best stock picks than trying to go it alone.

inTEST Corporation (NYSE:INTT) was in 3 hedge funds' portfolios at the end of September. INTT investors should be aware of a decrease in hedge fund sentiment in recent months. There were 4 hedge funds in our database with INTT holdings at the end of the previous quarter. Our calculations also showed that INTT isn't among the 30 most popular stocks among hedge funds.

In the financial world there are many signals market participants use to appraise publicly traded companies. A couple of the less known signals are hedge fund and insider trading sentiment. We have shown that, historically, those who follow the best picks of the top money managers can outclass the broader indices by a solid amount (see the details here).

[caption id="attachment_26286" align="aligncenter" width="359"]


Jim Simons of Renaissance Technologies[/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 check out the fresh hedge fund action encompassing inTEST Corporation (NYSE:INTT).

Hedge fund activity in inTEST Corporation (NYSE:INTT)

At the end of the third quarter, a total of 3 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -25% from the previous quarter. By comparison, 6 hedge funds held shares or bullish call options in INTT a year ago. With hedgies' sentiment swirling, there exists a select group of noteworthy hedge fund managers who were upping their holdings substantially (or already accumulated large positions).

No of Hedge Funds with INTT Positions
No of Hedge Funds with INTT Positions

Among these funds, Nokomis Capital held the most valuable stake in inTEST Corporation (NYSE:INTT), which was worth $4.6 million at the end of the third quarter. On the second spot was Renaissance Technologies which amassed $3.8 million worth of shares. Arrowstreet Capital was also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Nokomis Capital allocated the biggest weight to inTEST Corporation (NYSE:INTT), around 0.98% of its portfolio. Renaissance Technologies is also relatively very bullish on the stock, setting aside 0.0032 percent of its 13F equity portfolio to INTT.

We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: GLG 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 none of the 750+ hedge funds tracked by Insider Monkey identified INTT as a viable investment and initiated a position in the stock.

Let's go over hedge fund activity in other stocks - not necessarily in the same industry as inTEST Corporation (NYSE:INTT) but similarly valued. We will take a look at Neon Therapeutics, Inc. (NASDAQ:NTGN), CTI BioPharma Corp. (NASDAQ:CTIC), Bellicum Pharmaceuticals Inc (NASDAQ:BLCM), and Beyond Air, Inc. (NASDAQ:XAIR). This group of stocks' market values resemble INTT's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position NTGN,6,1672,0 CTIC,8,11996,1 BLCM,12,8619,1 XAIR,3,2211,1 Average,7.25,6125,0.75 [/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 $6 million. That figure was $8 million in INTT's case. Bellicum Pharmaceuticals Inc (NASDAQ:BLCM) is the most popular stock in this table. On the other hand Beyond Air, Inc. (NASDAQ:XAIR) is the least popular one with only 3 bullish hedge fund positions. Compared to these stocks inTEST Corporation (NYSE:INTT) is even less popular than XAIR. Hedge funds clearly dropped the ball on INTT as the stock delivered strong returns, though hedge funds' consensus picks still generated respectable returns. 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 INTT as the stock returned 22.4% during the fourth quarter (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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