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 Quotient Limited (NASDAQ:QTNT).
Hedge fund interest in Quotient Limited (NASDAQ:QTNT) shares was flat at the end of last quarter. This is usually a negative indicator. The level and the change in hedge fund popularity aren't the only variables you need to analyze to decipher hedge funds' perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That's why at the end of this article we will examine companies such as Hoegh LNG Partners LP (NYSE:HMLP), SunCoke Energy, Inc (NYSE:SXC), and Cheetah Mobile Inc (NYSE:CMCM) to gather more data points. Our calculations also showed that QTNT 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.
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_30576" align="aligncenter" width="501"] Glenn Russell Dubin of Highbridge Capital Management[/caption]
Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world's most bearish hedge fund that's more convinced than ever that a crash is coming, our long-short investment strategy doesn't rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds' buy/sell signals. We're going to take a look at the new hedge fund action regarding Quotient Limited (NASDAQ:QTNT).
What does smart money think about Quotient Limited (NASDAQ:QTNT)?
At the end of the third quarter, a total of 20 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards QTNT over the last 17 quarters. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Perceptive Advisors was the largest shareholder of Quotient Limited (NASDAQ:QTNT), with a stake worth $83.8 million reported as of the end of September. Trailing Perceptive Advisors was Polar Capital, which amassed a stake valued at $47.8 million. Cormorant Asset Management, Farallon Capital, and Highbridge Capital Management 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 Perceptive Advisors allocated the biggest weight to Quotient Limited (NASDAQ:QTNT), around 2.26% of its 13F portfolio. Highbridge Capital Management is also relatively very bullish on the stock, designating 1.89 percent of its 13F equity portfolio to QTNT.
Due to the fact that Quotient Limited (NASDAQ:QTNT) has witnessed bearish sentiment from the smart money, logic holds that there is a sect of hedge funds who sold off their entire stakes by the end of the third quarter. At the top of the heap, Matthew Hulsizer's PEAK6 Capital Management dumped the largest position of the 750 funds tracked by Insider Monkey, totaling an estimated $0.9 million in stock. Gavin Saitowitz and Cisco J. del Valle's fund, Springbok Capital, also said goodbye to its stock, about $0.6 million worth. These moves are important to note, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Quotient Limited (NASDAQ:QTNT) but similarly valued. These stocks are Hoegh LNG Partners LP (NYSE:HMLP), SunCoke Energy, Inc (NYSE:SXC), Cheetah Mobile Inc (NYSE:CMCM), and Heritage Commerce Corp. (NASDAQ:HTBK). This group of stocks' market caps match QTNT's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position HMLP,5,17184,-1 SXC,18,97942,-2 CMCM,4,9245,-2 HTBK,9,26610,1 Average,9,37745,-1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 9 hedge funds with bullish positions and the average amount invested in these stocks was $38 million. That figure was $230 million in QTNT's case. SunCoke Energy, Inc (NYSE:SXC) is the most popular stock in this table. On the other hand Cheetah Mobile Inc (NYSE:CMCM) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks Quotient Limited (NASDAQ:QTNT) is more popular among hedge funds. 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. Hedge funds were also right about betting on QTNT as the stock returned 10.6% during the first two months of Q4 and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
Disclosure: None. This article was originally published at Insider Monkey.