Looking for stocks with high upside potential? Just follow the big players within the hedge fund industry. Why should you do so? Let’s take a brief look at what statistics have to say about hedge funds’ stock picking abilities to illustrate. The Standard and Poor’s 500 Index returned approximately 26% in 2019 (through November 22nd). Conversely, hedge funds’ 20 preferred S&P 500 stocks generated a return of nearly 35% during the same period, with the majority of these stock picks outperforming the broader market benchmark. Coincidence? It might happen to be so, but it is unlikely. Our research covering the last 18 years indicates that hedge funds' consensus stock picks generate superior risk-adjusted returns. That's why we believe it is wise to check hedge fund activity before you invest your time or your savings on a stock like Actinium Pharmaceuticals Inc (NYSEAMERICAN:ATNM).
Actinium Pharmaceuticals Inc (NYSEAMERICAN:ATNM) shares haven't seen a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 6 hedge funds' portfolios at the end of the third quarter of 2019. At the end of this article we will also compare ATNM to other stocks including Basic Energy Services, Inc (NYSE:BAS), National Holdings Corporation (NASDAQ:NHLD), and Daxor Corporation (NYSEAMERICAN:DXR) to get a better sense of its popularity. 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' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
[caption id="attachment_315176" align="aligncenter" width="600"] Michael Castor of Sio Capital[/caption]
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 as a one-way bet based on an under-the-radar fund manager's investor letter and the stock already gained 20 percent. Now let's analyze the new hedge fund action encompassing Actinium Pharmaceuticals Inc (NYSEAMERICAN:ATNM).
How are hedge funds trading Actinium Pharmaceuticals Inc (NYSEAMERICAN:ATNM)?
At the end of the third quarter, a total of 6 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the previous quarter. On the other hand, there were a total of 4 hedge funds with a bullish position in ATNM a year ago. 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, Sabby Capital was the largest shareholder of Actinium Pharmaceuticals Inc (NYSEAMERICAN:ATNM), with a stake worth $2 million reported as of the end of September. Trailing Sabby Capital was Sio Capital, which amassed a stake valued at $1.4 million. Endurant Capital Management, Renaissance Technologies, and Citadel Investment 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 Sabby Capital allocated the biggest weight to Actinium Pharmaceuticals Inc (NYSEAMERICAN:ATNM), around 1.09% of its 13F portfolio. Sio Capital is also relatively very bullish on the stock, dishing out 0.44 percent of its 13F equity portfolio to ATNM.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Millennium Management. One hedge fund selling its entire position doesn't always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don't think this is the case in this case because only one of the 800+ hedge funds tracked by Insider Monkey identified as a viable investment and initiated a position in the stock (that fund was Citadel Investment Group).
Let's check out hedge fund activity in other stocks similar to Actinium Pharmaceuticals Inc (NYSEAMERICAN:ATNM). We will take a look at Basic Energy Services, Inc (NYSE:BAS), National Holdings Corporation (NASDAQ:NHLD), Daxor Corporation (NYSEAMERICAN:DXR), and Cinedigm Corp (NASDAQ:CIDM). All of these stocks' market caps are closest to ATNM's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position BAS,8,11744,0 NHLD,2,147,0 DXR,2,194,-1 CIDM,1,917,-2 Average,3.25,3251,-0.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 3.25 hedge funds with bullish positions and the average amount invested in these stocks was $3 million. That figure was $4 million in ATNM's case. Basic Energy Services, Inc (NYSE:BAS) is the most popular stock in this table. On the other hand Cinedigm Corp (NASDAQ:CIDM) is the least popular one with only 1 bullish hedge fund positions. Actinium Pharmaceuticals Inc (NYSEAMERICAN:ATNM) is not the most popular stock in this group but hedge fund interest is still above average. 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 ATNM as the stock returned 17.4% during the fourth quarter (through the end of November) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.