We are still in an overall bull market and many stocks that smart money investors were piling into surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Hedge funds' top 3 stock picks returned 41.7% this year and beat the S&P 500 ETFs by 14 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That's why we believe it isn't a waste of time to check out hedge fund sentiment before you invest in a stock like Atrion Corporation (NASDAQ:ATRI).
Atrion Corporation (NASDAQ:ATRI) investors should be aware of an increase in enthusiasm from smart money recently. Our calculations also showed that ATRI 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.
Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. 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_26073" align="alignnone" width="600"] Jim Simons of Renaissance Technologies[/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. We're going to check out the fresh hedge fund action surrounding Atrion Corporation (NASDAQ:ATRI).
What does smart money think about Atrion Corporation (NASDAQ:ATRI)?
Heading into the fourth quarter of 2019, a total of 16 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 45% from the second quarter of 2019. By comparison, 11 hedge funds held shares or bullish call options in ATRI 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.
More specifically, Renaissance Technologies was the largest shareholder of Atrion Corporation (NASDAQ:ATRI), with a stake worth $46.5 million reported as of the end of September. Trailing Renaissance Technologies was Royce & Associates, which amassed a stake valued at $27.8 million. Adage Capital Management, Citadel Investment Group, and Holocene Advisors 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 Grisanti Brown & Partners allocated the biggest weight to Atrion Corporation (NASDAQ:ATRI), around 0.46% of its 13F portfolio. Zebra Capital Management is also relatively very bullish on the stock, designating 0.44 percent of its 13F equity portfolio to ATRI.
With a general bullishness amongst the heavyweights, some big names have been driving this bullishness. Adage Capital Management, managed by Phill Gross and Robert Atchinson, initiated the biggest position in Atrion Corporation (NASDAQ:ATRI). Adage Capital Management had $7.8 million invested in the company at the end of the quarter. Brandon Haley's Holocene Advisors also initiated a $1.9 million position during the quarter. The following funds were also among the new ATRI investors: Peter Muller's PDT Partners, David E. Shaw's D E Shaw, and Benjamin A. Smith's Laurion Capital Management.
Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Atrion Corporation (NASDAQ:ATRI) but similarly valued. These stocks are Masonite International Corp (NYSE:DOOR), Tanger Factory Outlet Centers Inc. (NYSE:SKT), AAR Corp. (NYSE:AIR), and Comstock Resources Inc (NYSE:CRK). This group of stocks' market valuations are closest to ATRI's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position DOOR,17,286300,-2 SKT,18,80072,4 AIR,18,138846,-4 CRK,5,3783,1 Average,14.5,127250,-0.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 14.5 hedge funds with bullish positions and the average amount invested in these stocks was $127 million. That figure was $97 million in ATRI's case. Tanger Factory Outlet Centers Inc. (NYSE:SKT) is the most popular stock in this table. On the other hand Comstock Resources Inc (NYSE:CRK) is the least popular one with only 5 bullish hedge fund positions. Atrion Corporation (NASDAQ:ATRI) 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 ATRI wasn't nearly as popular as these 20 stocks and hedge funds that were betting on ATRI were disappointed as the stock returned -9.4% 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.