It seems that the masses and most of the financial media hate hedge funds and what they do, but why is this hatred of hedge funds so prominent? At the end of the day, these asset management firms do not gamble the hard-earned money of the people who are on the edge of poverty. Truth be told, most hedge fund managers and other smaller players within this industry are very smart and skilled investors. Of course, they may also make wrong bets in some instances, but no one knows what the future holds and how market participants will react to the bountiful news that floods in each day. The Standard and Poor’s 500 Index returned approximately 13.1% in the first 2.5 months of this year (including dividend payments). Conversely, hedge funds’ top 15 large-cap stock picks generated a return of 19.7% during the same 2.5-month period, with 93% 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' stock picks generate superior risk-adjusted returns. 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).
Is Atrion Corporation (NASDAQ:ATRI) a healthy stock for your portfolio? Investors who are in the know are getting less optimistic. The number of bullish hedge fund bets fell by 1 in recent months. Our calculations also showed that ATRI isn't among the 30 most popular stocks among hedge funds.
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 market by 32 percentage points since May 2014 through March 12, 2019 (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 our short portfolio.
Let's view the key hedge fund action regarding Atrion Corporation (NASDAQ:ATRI).
What have hedge funds been doing with Atrion Corporation (NASDAQ:ATRI)?
At the end of the fourth quarter, a total of 10 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -9% from the second quarter of 2018. By comparison, 12 hedge funds held shares or bullish call options in ATRI a year ago. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Atrion Corporation (NASDAQ:ATRI) was held by Renaissance Technologies, which reported holding $45.8 million worth of stock at the end of December. It was followed by Royce & Associates with a $28 million position. Other investors bullish on the company included Citadel Investment Group, AQR Capital Management, and Zebra Capital Management.
Seeing as Atrion Corporation (NASDAQ:ATRI) has witnessed falling interest from hedge fund managers, logic holds that there exists a select few hedge funds that slashed their positions entirely in the third quarter. It's worth mentioning that Israel Englander's Millennium Management sold off the largest position of the "upper crust" of funds followed by Insider Monkey, comprising close to $0.7 million in stock. Paul Tudor Jones's fund, Tudor Investment Corp, also cut its stock, about $0.3 million worth. These transactions are intriguing to say the least, as total hedge fund interest fell by 1 funds in the third quarter.
Let's go over hedge fund activity in other stocks similar to Atrion Corporation (NASDAQ:ATRI). These stocks are Osisko Gold Royalties Ltd (NYSE:OR), Vector Group Ltd (NYSE:VGR), Vanda Pharmaceuticals Inc. (NASDAQ:VNDA), and Fresh Del Monte Produce Inc (NYSE:FDP). All of these stocks' market caps are closest to ATRI's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position OR,11,22535,1 VGR,20,158726,2 VNDA,19,376551,-1 FDP,15,42866,1 Average,16.25,150170,0.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 16.25 hedge funds with bullish positions and the average amount invested in these stocks was $150 million. That figure was $81 million in ATRI's case. Vector Group Ltd (NYSE:VGR) is the most popular stock in this table. On the other hand Osisko Gold Royalties Ltd (NYSE:OR) is the least popular one with only 11 bullish hedge fund positions. Compared to these stocks Atrion Corporation (NASDAQ:ATRI) is even less popular than OR. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. A small number of hedge funds were also right about betting on ATRI, though not to the same extent, as the stock returned 18.1% and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.
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