Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips or bumps on the charts usually don't make them change their opinion towards a company. This time it may be different. The coronavirus pandemic destroyed the high correlations among major industries and asset classes. We are now in a stock pickers market where fundamentals of a stock have more effect on the price than the overall direction of the market. As a result we observe sudden and large changes in hedge fund positions depending on the news flow. Let’s take a look at the hedge fund sentiment towards EDAP TMS S.A. (NASDAQ:EDAP) to find out whether there were any major changes in hedge funds' views.
Hedge fund interest in EDAP TMS S.A. (NASDAQ:EDAP) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that EDAP isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks). 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 PCB Bancorp (NASDAQ:PCB), ESSA Bancorp, Inc. (NASDAQ:ESSA), and FVCBankcorp, Inc. (NASDAQ:FVCB) to gather more data points. Video: Watch our video about the top 5 most popular hedge fund stocks.
At the moment there are a multitude of gauges stock traders can use to grade stocks. A couple of the less utilized gauges are hedge fund and insider trading sentiment. Our experts have shown that, historically, those who follow the best picks of the top fund managers can outpace the broader indices by a very impressive margin (see the details here).
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At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. 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. You can subscribe to our free daily newsletter on our website. Keeping this in mind let's take a peek at the key hedge fund action surrounding EDAP TMS S.A. (NASDAQ:EDAP).
Hedge fund activity in EDAP TMS S.A. (NASDAQ:EDAP)
At the end of the third quarter, a total of 3 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the previous quarter. On the other hand, there were a total of 6 hedge funds with a bullish position in EDAP a year ago. With the smart money's capital changing hands, there exists an "upper tier" of key hedge fund managers who were upping their holdings meaningfully (or already accumulated large positions).
Among these funds, Opaleye Management held the most valuable stake in EDAP TMS S.A. (NASDAQ:EDAP), which was worth $4.8 million at the end of the third quarter. On the second spot was Archon Capital Management which amassed $3.8 million worth of shares. Parkman Healthcare Partners 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 Opaleye Management allocated the biggest weight to EDAP TMS S.A. (NASDAQ:EDAP), around 0.94% of its 13F portfolio. Archon Capital Management is also relatively very bullish on the stock, designating 0.77 percent of its 13F equity portfolio to EDAP.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Millennium Management. 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 Parkman Healthcare Partners).
Let's check out hedge fund activity in other stocks similar to EDAP TMS S.A. (NASDAQ:EDAP). These stocks are PCB Bancorp (NASDAQ:PCB), ESSA Bancorp, Inc. (NASDAQ:ESSA), FVCBankcorp, Inc. (NASDAQ:FVCB), Leaf Group Ltd (NYSE:LEAF), Contura Energy, Inc. (NYSE:CTRA), DIRTT Environmental Solutions Ltd. (NASDAQ:DRTT), and GSI Technology, Inc. (NASDAQ:GSIT). This group of stocks' market values are closest to EDAP's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position PCB,4,14857,0 ESSA,3,8857,1 FVCB,3,3495,-1 LEAF,10,26521,-1 CTRA,18,46876,-1 DRTT,8,24577,-1 GSIT,4,12757,-1 Average,7.1,19706,-0.6 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 7.1 hedge funds with bullish positions and the average amount invested in these stocks was $20 million. That figure was $9 million in EDAP's case. Contura Energy, Inc. (NYSE:CTRA) is the most popular stock in this table. On the other hand ESSA Bancorp, Inc. (NASDAQ:ESSA) is the least popular one with only 3 bullish hedge fund positions. Compared to these stocks EDAP TMS S.A. (NASDAQ:EDAP) is even less popular than ESSA. Our overall hedge fund sentiment score for EDAP is 20. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Hedge funds dodged a bullet by taking a bearish stance towards EDAP. Our calculations showed that the top 20 most popular hedge fund stocks returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 28.1% in 2020 through November 23rd but managed to beat the market again by 15.4 percentage points. Unfortunately EDAP wasn't nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); EDAP investors were disappointed as the stock returned -11.1% since the end of the third quarter (through 11/23) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as most of these stocks already outperformed the market so far in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.