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Is Health Insurance Innovations Inc (HIIQ) Going to Burn These Hedge Funds?

Asma UL Husna

We are still in an overall bull market and many stocks that smart money investors were piling into surged through October 17th. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 45% and 39% respectively. Hedge funds' top 3 stock picks returned 34.4% this year and beat the S&P 500 ETFs by 13 percentage points. That's a big deal.This is why following the smart money sentiment is a useful tool at identifying the next stock to invest in.

Is Health Insurance Innovations Inc (NASDAQ:HIIQ) the right pick for your portfolio? The smart money is reducing their bets on the stock. The number of bullish hedge fund bets were cut by 3 in recent months. Our calculations also showed that HIIQ isn't among the 30 most popular stocks among hedge funds (see the video below). HIIQ was in 19 hedge funds' portfolios at the end of June. There were 22 hedge funds in our database with HIIQ positions at the end of the previous quarter. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

5 Most Popular Stocks Among Hedge Funds

Today there are plenty of signals stock traders employ to grade publicly traded companies. Two of the best signals are hedge fund and insider trading activity. We have shown that, historically, those who follow the best picks of the top fund managers can trounce the market by a superb margin (see the details here).

HIIQ_oct2019

Unlike other investors who track every movement of the 25 largest hedge funds, our long-short investment strategy relies on hedge fund buy/sell signals given by the 100 best performing hedge funds. We're going to take a gander at the new hedge fund action surrounding Health Insurance Innovations Inc (NASDAQ:HIIQ).

What does smart money think about Health Insurance Innovations Inc (NASDAQ:HIIQ)?

At the end of the second quarter, a total of 19 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -14% from the first quarter of 2019. The graph below displays the number of hedge funds with bullish position in HIIQ over the last 16 quarters. With the smart money's sentiment swirling, there exists an "upper tier" of key hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).

Carlo Cannell

The largest stake in Health Insurance Innovations Inc (NASDAQ:HIIQ) was held by Cannell Capital, which reported holding $26.3 million worth of stock at the end of March. It was followed by Hunt Lane Capital with a $22 million position. Other investors bullish on the company included P2 Capital Partners, Cardinal Capital, and Capital Returns Management.

Seeing as Health Insurance Innovations Inc (NASDAQ:HIIQ) has experienced declining sentiment from the aggregate hedge fund industry, it's safe to say that there is a sect of hedgies who sold off their full holdings by the end of the second quarter. It's worth mentioning that Ken Griffin's Citadel Investment Group dumped the biggest stake of all the hedgies watched by Insider Monkey, totaling close to $5.4 million in stock. Philip Hempleman's fund, Ardsley Partners, also dropped its stock, about $2.4 million worth. These transactions are interesting, as aggregate hedge fund interest was cut by 3 funds by the end of the second quarter.

Let's go over hedge fund activity in other stocks similar to Health Insurance Innovations Inc (NASDAQ:HIIQ). These stocks are Marker Therapeutics, Inc. (NASDAQ:MRKR), Red River Bancshares, Inc. (NASDAQ:RRBI), Care.com Inc (NYSE:CRCM), and MiX Telematics Limited (NYSE:MIXT). This group of stocks' market valuations resemble HIIQ's market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position MRKR,9,34779,-1 RRBI,3,3948,3 CRCM,21,113594,3 MIXT,8,46948,0 Average,10.25,49817,1.25 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 10.25 hedge funds with bullish positions and the average amount invested in these stocks was $50 million. That figure was $131 million in HIIQ's case. Care.com Inc (NYSE:CRCM) is the most popular stock in this table. On the other hand Red River Bancshares, Inc. (NASDAQ:RRBI) is the least popular one with only 3 bullish hedge fund positions. Health Insurance Innovations Inc (NASDAQ:HIIQ) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately HIIQ wasn't nearly as popular as these 20 stocks and hedge funds that were betting on HIIQ were disappointed as the stock returned -3.8% during the third quarter 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 many of these stocks already outperformed the market so far this year.

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

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