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We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn't mean that they don't have occasional colossal losses; they do. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards Luminex Corporation (NASDAQ:LMNX) and determine whether hedge funds skillfully traded this stock.
Is Luminex Corporation (NASDAQ:LMNX) a cheap investment right now? Investors who are in the know were getting more bullish. The number of bullish hedge fund positions advanced by 12 recently. Luminex Corporation (NASDAQ:LMNX) was in 27 hedge funds' portfolios at the end of June. The all time high for this statistics is 23. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that LMNX isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks). There were 15 hedge funds in our database with LMNX positions at the end of the first quarter.
Video: Watch our video about the top 5 most popular hedge fund stocks.
In the eyes of most traders, hedge funds are assumed to be slow, outdated investment tools of the past. While there are greater than 8000 funds with their doors open at the moment, We choose to focus on the crème de la crème of this group, about 850 funds. These hedge fund managers orchestrate bulk of all hedge funds' total capital, and by monitoring their first-class stock picks, Insider Monkey has formulated numerous investment strategies that have historically outperformed the broader indices. Insider Monkey's flagship short hedge fund strategy outpaced the S&P 500 short ETFs by around 20 percentage points per annum since its inception in March 2017. Our portfolio of short stocks lost 34% since February 2017 (through August 17th) even though the market was up 53% during the same period. We just shared a list of 8 short targets in our latest quarterly update .
Robert G. Moses of RGM Capital
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, legal marijuana is one of the fastest growing industries right now, so we are checking out stock pitches like “the Starbucks of cannabis” to identify the next tenbagger. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website to get excerpts of these letters in your inbox. Keeping this in mind we're going to check out the fresh hedge fund action regarding Luminex Corporation (NASDAQ:LMNX).
How are hedge funds trading Luminex Corporation (NASDAQ:LMNX)?
At second quarter's end, a total of 27 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 80% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards LMNX over the last 20 quarters. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, RGM Capital was the largest shareholder of Luminex Corporation (NASDAQ:LMNX), with a stake worth $87.3 million reported as of the end of September. Trailing RGM Capital was Renaissance Technologies, which amassed a stake valued at $76.4 million. Select Equity Group, Millennium Management, and Redmile Group 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 RGM Capital allocated the biggest weight to Luminex Corporation (NASDAQ:LMNX), around 5.26% of its 13F portfolio. DAFNA Capital Management is also relatively very bullish on the stock, dishing out 1.45 percent of its 13F equity portfolio to LMNX.
As aggregate interest increased, specific money managers were breaking ground themselves. Redmile Group, managed by Jeremy Green, created the most valuable position in Luminex Corporation (NASDAQ:LMNX). Redmile Group had $29.9 million invested in the company at the end of the quarter. Noam Gottesman's GLG Partners also made a $4.5 million investment in the stock during the quarter. The other funds with new positions in the stock are Alec Litowitz and Ross Laser's Magnetar Capital, Greg Eisner's Engineers Gate Manager, and Matthew Hulsizer's PEAK6 Capital Management.
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Luminex Corporation (NASDAQ:LMNX) but similarly valued. These stocks are Rush Enterprises, Inc. (NASDAQ:RUSHA), Cerence Inc. (NASDAQ:CRNC), Kiniksa Pharmaceuticals, Ltd. (NASDAQ:KNSA), Urban Outfitters, Inc. (NASDAQ:URBN), Comfort Systems USA, Inc. (NYSE:FIX), Mueller Water Products, Inc. (NYSE:MWA), and Sinclair Broadcast Group, Inc. (NASDAQ:SBGI). All of these stocks' market caps resemble LMNX's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position RUSHA,18,59748,1 CRNC,14,148123,3 KNSA,18,294081,8 URBN,20,54759,-3 FIX,22,80323,2 MWA,21,197650,1 SBGI,24,258240,-1 Average,19.6,156132,1.6 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 19.6 hedge funds with bullish positions and the average amount invested in these stocks was $156 million. That figure was $375 million in LMNX's case. Sinclair Broadcast Group, Inc. (NASDAQ:SBGI) is the most popular stock in this table. On the other hand Cerence Inc. (NASDAQ:CRNC) is the least popular one with only 14 bullish hedge fund positions. Compared to these stocks Luminex Corporation (NASDAQ:LMNX) is more popular among hedge funds. Our overall hedge fund sentiment score for LMNX is 90. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. 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 21.3% in 2020 through September 25th and still beat the market by 17.7 percentage points. Unfortunately LMNX wasn't nearly as popular as these 10 stocks and hedge funds that were betting on LMNX were disappointed as the stock returned -22.1% since the end of the second 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 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.