Hedge fund managers like David Einhorn, Bill Ackman, or Carl Icahn became billionaires through reaping large profits for their investors, which is why piggybacking their stock picks may provide us with significant returns as well. Many hedge funds, like Paul Singer’s Elliott Management, are pretty secretive, but we can still get some insights by analyzing their quarterly 13F filings. One of the most fertile grounds for large abnormal returns is hedge funds’ most popular small-cap picks, which are not so widely followed and often trade at a discount to their intrinsic value. In this article we will check out hedge fund activity in another small-cap stock: BioTelemetry, Inc. (NASDAQ:BEAT).
Is BioTelemetry, Inc. (NASDAQ:BEAT) a great investment now? Investors who are in the know are turning bullish. The number of long hedge fund positions increased by 8 lately. Our calculations also showed that BEAT 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.
We're going to take a peek at the latest hedge fund action surrounding BioTelemetry, Inc. (NASDAQ:BEAT).
What have hedge funds been doing with BioTelemetry, Inc. (NASDAQ:BEAT)?
Heading into the first quarter of 2019, a total of 24 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 50% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards BEAT over the last 14 quarters. With hedge funds' capital changing hands, there exists a few notable hedge fund managers who were adding to their stakes meaningfully (or already accumulated large positions).
The largest stake in BioTelemetry, Inc. (NASDAQ:BEAT) was held by Renaissance Technologies, which reported holding $15.7 million worth of stock at the end of September. It was followed by Harvest Capital Strategies with a $13.1 million position. Other investors bullish on the company included PDT Partners, PEAK6 Capital Management, and Point72 Asset Management.
Consequently, key hedge funds have jumped into BioTelemetry, Inc. (NASDAQ:BEAT) headfirst. Renaissance Technologies, managed by Jim Simons, initiated the most outsized position in BioTelemetry, Inc. (NASDAQ:BEAT). Renaissance Technologies had $15.7 million invested in the company at the end of the quarter. John Osterweis's Osterweis Capital Management also made a $5.7 million investment in the stock during the quarter. The following funds were also among the new BEAT investors: Richard Driehaus's Driehaus Capital, D. E. Shaw's D E Shaw, and Joel Greenblatt's Gotham Asset Management.
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as BioTelemetry, Inc. (NASDAQ:BEAT) but similarly valued. These stocks are Crestwood Equity Partners LP (NYSE:CEQP), Cirrus Logic, Inc. (NASDAQ:CRUS), Designer Brands Inc. (NYSE:DSW), and Worthington Industries, Inc. (NYSE:WOR). This group of stocks' market values are similar to BEAT's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CEQP,3,25732,-1 CRUS,20,174774,-1 DSW,27,185944,0 WOR,11,59813,1 Average,15.25,111566,-0.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 15.25 hedge funds with bullish positions and the average amount invested in these stocks was $112 million. That figure was $76 million in BEAT's case. Designer Brands Inc. (NYSE:DSW) is the most popular stock in this table. On the other hand Crestwood Equity Partners LP (NYSE:CEQP) is the least popular one with only 3 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. This is a slightly positive signal but we'd rather spend our time researching stocks that hedge funds are piling on. 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. Unfortunately BEAT wasn't nearly as popular as these 15 stock and hedge funds that were betting on BEAT were disappointed as the stock returned -7.3% and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 15 most popular stocks) among hedge funds as 13 of these stocks already outperformed the market this year.
Disclosure: None. This article was originally published at Insider Monkey.