Reputable billionaire investors such as Jim Simons, Cliff Asness and David Tepper generate exorbitant profits for their wealthy accredited investors (a minimum of $1 million in investable assets would be required to invest in a hedge fund and most successful hedge funds won't accept your savings unless you commit at least $5 million) by pinpointing winning small-cap stocks. There is little or no publicly-available information at all on some of these small companies, which makes it hard for an individual investor to pin down a winner within the small-cap space. However, hedge funds and other big asset managers can do the due diligence and analysis for you instead, thanks to their highly-skilled research teams and vast resources to conduct an appropriate evaluation process. Looking for potential winners within the small-cap galaxy of stocks? We believe following the smart money is a good starting point.
Senseonics Holdings, Inc. (NYSE:SENS) has seen a decrease in enthusiasm from smart money in recent months. Our calculations also showed that SENS isn't among the 30 most popular stocks among hedge funds (see the video below). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's flagship best performing hedge funds strategy returned 25.8% year to date (through May 30th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 40 percentage points since its inception (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
In addition to following the biggest hedge funds for investment ideas, we also share stock pitches from conferences, investor letters and other sources like this one where the fund manager is talking about two under the radar 1000% return potential stocks: first one in internet infrastructure and the second in the heart of advertising market. We use hedge fund buy/sell signals to determine whether to conduct in-depth analysis of these stock ideas which take days. Let's analyze the key hedge fund action regarding Senseonics Holdings, Inc. (NYSE:SENS).
How have hedgies been trading Senseonics Holdings, Inc. (NYSE:SENS)?
Heading into the third quarter of 2019, a total of 9 of the hedge funds tracked by Insider Monkey were long this stock, a change of -10% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards SENS over the last 16 quarters. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Millennium Management held the most valuable stake in Senseonics Holdings, Inc. (NYSE:SENS), which was worth $2.3 million at the end of the second quarter. On the second spot was Endurant Capital Management which amassed $1.5 million worth of shares. Moreover, Sio Capital, Hudson Bay Capital Management, and Wexford Capital were also bullish on Senseonics Holdings, Inc. (NYSE:SENS), allocating a large percentage of their portfolios to this stock.
Because Senseonics Holdings, Inc. (NYSE:SENS) has experienced a decline in interest from the smart money, logic holds that there was a specific group of hedgies who sold off their positions entirely by the end of the second quarter. It's worth mentioning that Ken Griffin's Citadel Investment Group dropped the largest stake of the 750 funds followed by Insider Monkey, worth an estimated $1 million in stock. Paul Marshall and Ian Wace's fund, Marshall Wace LLP, also cut its stock, about $0.3 million worth. These moves are important to note, as aggregate hedge fund interest was cut by 1 funds by the end of the second quarter.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Senseonics Holdings, Inc. (NYSE:SENS) but similarly valued. These stocks are Cross Country Healthcare, Inc. (NASDAQ:CCRN), Business First Bancshares, Inc. (NASDAQ:BFST), Forum Energy Technologies Inc (NYSE:FET), and GTY Technology Holdings, Inc. (NASDAQ:GTYH). This group of stocks' market valuations are closest to SENS's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CCRN,8,23148,0 BFST,1,16390,0 FET,19,58008,3 GTYH,4,23213,-5 Average,8,30190,-0.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 8 hedge funds with bullish positions and the average amount invested in these stocks was $30 million. That figure was $6 million in SENS's case. Forum Energy Technologies Inc (NYSE:FET) is the most popular stock in this table. On the other hand Business First Bancshares, Inc. (NASDAQ:BFST) is the least popular one with only 1 bullish hedge fund positions. Senseonics Holdings, Inc. (NYSE:SENS) 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 SENS wasn't nearly as popular as these 20 stocks and hedge funds that were betting on SENS were disappointed as the stock returned -51.5% 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.