We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors' consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of BioTelemetry, Inc. (NASDAQ:BEAT).
BioTelemetry, Inc. (NASDAQ:BEAT) was in 15 hedge funds' portfolios at the end of the fourth quarter of 2019. BEAT has seen a decrease in enthusiasm from smart money lately. There were 18 hedge funds in our database with BEAT positions at the end of the previous quarter. Our calculations also showed that BEAT isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 S&P 500 ETFs by more than 41 percentage points since March 2017 (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. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
[caption id="attachment_315176" align="aligncenter" width="400"] Michael Castor of Sio Capital[/caption]
We leave no stone unturned when looking for the next great investment idea. For example, Federal Reserve and other Central Banks are tripping over each other to print more money. As a result, we believe gold stocks will outperform fixed income ETFs in the long-term. So we are checking out investment opportunities like this one. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic's significance before most investors. Now let's view the new hedge fund action regarding BioTelemetry, Inc. (NASDAQ:BEAT).
How have hedgies been trading BioTelemetry, Inc. (NASDAQ:BEAT)?
At Q4's end, a total of 15 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -17% from the third quarter of 2019. Below, you can check out the change in hedge fund sentiment towards BEAT over the last 18 quarters. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Of the funds tracked by Insider Monkey, Royce & Associates, managed by Chuck Royce, holds the largest position in BioTelemetry, Inc. (NASDAQ:BEAT). Royce & Associates has a $14.7 million position in the stock, comprising 0.1% of its 13F portfolio. On Royce & Associates's heels is Sio Capital, led by Michael Castor, holding a $7.4 million position; 1.8% of its 13F portfolio is allocated to the company. Some other members of the smart money with similar optimism encompass Mitchell Blutt's Consonance Capital Management, Frederick DiSanto's Ancora Advisors and Noam Gottesman's GLG Partners. In terms of the portfolio weights assigned to each position Lyon Street Capital allocated the biggest weight to BioTelemetry, Inc. (NASDAQ:BEAT), around 2.44% of its 13F portfolio. Sio Capital is also relatively very bullish on the stock, designating 1.76 percent of its 13F equity portfolio to BEAT.
Since BioTelemetry, Inc. (NASDAQ:BEAT) has faced bearish sentiment from hedge fund managers, logic holds that there exists a select few hedgies who sold off their positions entirely last quarter. At the top of the heap, Matthew Hulsizer's PEAK6 Capital Management said goodbye to the biggest investment of the "upper crust" of funds watched by Insider Monkey, valued at about $1.1 million in stock. Cliff Asness's fund, AQR Capital Management, also dropped its stock, about $1 million worth. These transactions are interesting, as total hedge fund interest dropped by 3 funds last quarter.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as BioTelemetry, Inc. (NASDAQ:BEAT) but similarly valued. These stocks are Seacoast Banking Corporation of Florida (NASDAQ:SBCF), STAAR Surgical Company (NASDAQ:STAA), SFL Corporation Ltd. (NYSE:SFL), and Comstock Resources Inc (NYSE:CRK). This group of stocks' market caps are closest to BEAT's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SBCF,8,50927,2 STAA,23,612599,8 SFL,14,89602,0 CRK,7,3882,2 Average,13,189253,3 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 13 hedge funds with bullish positions and the average amount invested in these stocks was $189 million. That figure was $50 million in BEAT's case. STAAR Surgical Company (NASDAQ:STAA) is the most popular stock in this table. On the other hand Comstock Resources Inc (NYSE:CRK) is the least popular one with only 7 bullish hedge fund positions. BioTelemetry, Inc. (NASDAQ:BEAT) 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 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 13.0% in 2020 through April 6th but still beat the market by 4.2 percentage points. Hedge funds were also right about betting on BEAT, though not to the same extent, as the stock returned -14.2% during the first three months of 2020 (through April 6th) and outperformed the market as well. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.