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Hedge Funds Are Crazy About PolarityTE, Inc. (PTE)

Reymerlyn Martin

Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track nearly 750 active prominent money managers and analyze their quarterly 13F filings. The stocks that are heavily bought by hedge funds historically outperformed the market, though there is no shortage of high profile failures like hedge funds' 2018 losses in Facebook and Apple. Let’s take a closer look at what the funds we track think about PolarityTE, Inc. (NASDAQ:PTE) in this article.

Is PolarityTE, Inc. (NASDAQ:PTE) worth your attention right now? The best stock pickers are betting on the stock. The number of bullish hedge fund bets increased by 1 in recent months. Our calculations also showed that PTE isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

5 Most Popular Stocks Among Hedge Funds
5 Most Popular Stocks Among Hedge Funds

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.8% through November 21, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

[caption id="attachment_687238" align="aligncenter" width="1613"] Philip Hempleman of Ardsley Partners[/caption]

Philip Hempleman Ardsley Partners
Philip Hempleman Ardsley Partners

We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. 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 even check out this option genius’ weekly trade ideas. This December we recommended Adams Energy based on an under-the-radar fund manager’s investor letter and the stock gained 20 percent. We're going to take a glance at the key hedge fund action regarding PolarityTE, Inc. (NASDAQ:PTE).

What does smart money think about PolarityTE, Inc. (NASDAQ:PTE)?

At the end of the third quarter, a total of 11 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 10% from one quarter earlier. On the other hand, there were a total of 14 hedge funds with a bullish position in PTE a year ago. With hedge funds' sentiment swirling, there exists an "upper tier" of key hedge fund managers who were boosting their holdings significantly (or already accumulated large positions).

More specifically, Castle Hook Partners was the largest shareholder of PolarityTE, Inc. (NASDAQ:PTE), with a stake worth $3.9 million reported as of the end of September. Trailing Castle Hook Partners was DSAM Partners, which amassed a stake valued at $3.4 million. Ardsley Partners, Healthcor Management, and D E Shaw were 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 DSAM Partners allocated the biggest weight to PolarityTE, Inc. (NASDAQ:PTE), around 0.63% of its 13F portfolio. Ardsley Partners is also relatively very bullish on the stock, dishing out 0.61 percent of its 13F equity portfolio to PTE.

As industrywide interest jumped, some big names were leading the bulls' herd. Citadel Investment Group, managed by Ken Griffin, assembled the biggest position in PolarityTE, Inc. (NASDAQ:PTE). Citadel Investment Group had $0.1 million invested in the company at the end of the quarter.

Let's go over hedge fund activity in other stocks - not necessarily in the same industry as PolarityTE, Inc. (NASDAQ:PTE) but similarly valued. These stocks are Servicesource International Inc (NASDAQ:SREV), Gulf Island Fabrication, Inc. (NASDAQ:GIFI), Consumer Portfolio Services, Inc. (NASDAQ:CPSS), and Lightinthebox Holding Co Ltd (NYSE:LITB). This group of stocks' market caps are closest to PTE's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SREV,13,23539,-1 GIFI,11,14660,2 CPSS,1,1332,0 LITB,2,461,1 Average,6.75,9998,0.5 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 6.75 hedge funds with bullish positions and the average amount invested in these stocks was $10 million. That figure was $14 million in PTE's case. Servicesource International Inc (NASDAQ:SREV) is the most popular stock in this table. On the other hand Consumer Portfolio Services, Inc. (NASDAQ:CPSS) is the least popular one with only 1 bullish hedge fund positions. PolarityTE, Inc. (NASDAQ:PTE) 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 PTE wasn't nearly as popular as these 20 stocks and hedge funds that were betting on PTE were disappointed as the stock returned 0.3% 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.

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