Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed in recent years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets hoping that they will outperform the broader market. Our research shows that certain hedge funds do have great stock picking skills (and we can identify these hedge funds in advance pretty accurately), so let’s take a glance at the smart money sentiment towards ConforMIS, Inc. (NASDAQ:CFMS).
Is ConforMIS, Inc. (NASDAQ:CFMS) worth your attention right now? Hedge funds are buying. The number of long hedge fund bets increased by 1 lately. Our calculations also showed that CFMS isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). CFMS was in 8 hedge funds' portfolios at the end of September. There were 7 hedge funds in our database with CFMS holdings at the end of the previous quarter. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
To the average investor there are tons of gauges investors employ to size up stocks. A duo of the best gauges are hedge fund and insider trading indicators. Our researchers have shown that, historically, those who follow the top picks of the best investment managers can trounce the S&P 500 by a significant amount (see the details here).
[caption id="attachment_30621" align="aligncenter" width="487"] Cliff Asness of AQR Capital Management[/caption]
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world's largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, "I'm investing more today than I did back in early 2009." So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds' buy/sell signals. Let's take a gander at the recent hedge fund action encompassing ConforMIS, Inc. (NASDAQ:CFMS).
What have hedge funds been doing with ConforMIS, Inc. (NASDAQ:CFMS)?
Heading into the fourth quarter of 2019, a total of 8 of the hedge funds tracked by Insider Monkey were long this stock, a change of 14% from the previous quarter. The graph below displays the number of hedge funds with bullish position in CFMS over the last 17 quarters. With the smart money's sentiment swirling, there exists a select group of key hedge fund managers who were adding to their holdings considerably (or already accumulated large positions).
The largest stake in ConforMIS, Inc. (NASDAQ:CFMS) was held by Archon Capital Management, which reported holding $10.7 million worth of stock at the end of September. It was followed by Renaissance Technologies with a $9.6 million position. Other investors bullish on the company included AQR Capital Management, Millennium Management, and Two Sigma Advisors. In terms of the portfolio weights assigned to each position Archon Capital Management allocated the biggest weight to ConforMIS, Inc. (NASDAQ:CFMS), around 2.53% of its 13F portfolio. Renaissance Technologies is also relatively very bullish on the stock, earmarking 0.01 percent of its 13F equity portfolio to CFMS.
As aggregate interest increased, specific money managers have jumped into ConforMIS, Inc. (NASDAQ:CFMS) headfirst. AQR Capital Management, managed by Cliff Asness, assembled the most valuable position in ConforMIS, Inc. (NASDAQ:CFMS). AQR Capital Management had $4.9 million invested in the company at the end of the quarter.
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as ConforMIS, Inc. (NASDAQ:CFMS) but similarly valued. These stocks are Trinity Place Holdings Inc. (NYSE:TPHS), Perion Network Ltd (NASDAQ:PERI), Flotek Industries Inc (NYSE:FTK), and RADCOM Ltd. (NASDAQ:RDCM). All of these stocks' market caps are similar to CFMS's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position TPHS,12,60747,2 PERI,3,9261,2 FTK,10,17580,0 RDCM,4,14881,0 Average,7.25,25617,1 [/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 $26 million. That figure was $26 million in CFMS's case. Trinity Place Holdings Inc. (NYSE:TPHS) is the most popular stock in this table. On the other hand Perion Network Ltd (NASDAQ:PERI) is the least popular one with only 3 bullish hedge fund positions. ConforMIS, Inc. (NASDAQ:CFMS) 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 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately CFMS wasn't nearly as popular as these 20 stocks and hedge funds that were betting on CFMS were disappointed as the stock returned 0% during the fourth quarter (through the end of November) 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.