The financial regulations require hedge funds and wealthy investors that exceeded the $100 million equity holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn't the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds' positions on March 31st, about a week after the S&P 500 Index bottomed. We at Insider Monkey have made an extensive database of more than 821 of those established hedge funds and famous value investors' filings. In this article, we analyze how these elite funds and prominent investors traded 3D Systems Corporation (NYSE:DDD) based on those filings.
3D Systems Corporation (NYSE:DDD) shareholders have witnessed a decrease in enthusiasm from smart money recently. DDD was in 18 hedge funds' portfolios at the end of March. There were 19 hedge funds in our database with DDD positions at the end of the previous quarter. Our calculations also showed that DDD isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks). Video: Watch our video about the top 5 most popular hedge fund stocks.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 S&P 500 ETFs by more than 58 percentage points since March 2017 (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. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
[caption id="attachment_30602" align="aligncenter" width="395"] Philippe Laffont of Coatue 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. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now let's check out the latest hedge fund action surrounding 3D Systems Corporation (NYSE:DDD).
Hedge fund activity in 3D Systems Corporation (NYSE:DDD)
At the end of the first quarter, a total of 18 of the hedge funds tracked by Insider Monkey were long this stock, a change of -5% from the previous quarter. By comparison, 13 hedge funds held shares or bullish call options in DDD a year ago. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to Insider Monkey's hedge fund database, D. E. Shaw's D E Shaw has the number one position in 3D Systems Corporation (NYSE:DDD), worth close to $36.3 million, comprising 0.1% of its total 13F portfolio. Sitting at the No. 2 spot of Renaissance Technologies, with a $8.7 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Other professional money managers that hold long positions consist of Philippe Laffont's Coatue Management, Ken Griffin's Citadel Investment Group and Chuck Royce's Royce & Associates. In terms of the portfolio weights assigned to each position Weld Capital Management allocated the biggest weight to 3D Systems Corporation (NYSE:DDD), around 0.14% of its 13F portfolio. TwinBeech Capital is also relatively very bullish on the stock, setting aside 0.11 percent of its 13F equity portfolio to DDD.
Because 3D Systems Corporation (NYSE:DDD) has experienced declining sentiment from the aggregate hedge fund industry, logic holds that there was a specific group of money managers who sold off their entire stakes heading into Q4. Interestingly, Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital cut the largest position of all the hedgies tracked by Insider Monkey, worth an estimated $3.9 million in stock, and Richard SchimeláandáLawrence Sapanski's Cinctive Capital Management was right behind this move, as the fund cut about $1.2 million worth. These bearish behaviors are important to note, as total hedge fund interest was cut by 1 funds heading into Q4.
Let's check out hedge fund activity in other stocks - not necessarily in the same industry as 3D Systems Corporation (NYSE:DDD) but similarly valued. We will take a look at Nova Measuring Instruments Ltd. (NASDAQ:NVMI), Zuora, Inc. (NYSE:ZUO), Scientific Games Corp (NASDAQ:SGMS), and Trupanion Inc (NASDAQ:TRUP). All of these stocks' market caps match DDD's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position NVMI,10,157943,0 ZUO,23,102623,-3 SGMS,22,226145,-11 TRUP,13,140895,0 Average,17,156902,-3.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 17 hedge funds with bullish positions and the average amount invested in these stocks was $157 million. That figure was $64 million in DDD's case. Zuora, Inc. (NYSE:ZUO) is the most popular stock in this table. On the other hand Nova Measuring Instruments Ltd. (NASDAQ:NVMI) is the least popular one with only 10 bullish hedge fund positions. 3D Systems Corporation (NYSE:DDD) 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 13.4% in 2020 through June 22nd but beat the market by 15.9 percentage points. Unfortunately DDD wasn't nearly as popular as these 10 stocks and hedge funds that were betting on DDD were disappointed as the stock returned -8% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 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.