We at Insider Monkey have gone over 821 13F filings that hedge funds and prominent investors are required to file by the SEC The 13F filings show the funds' and investors' portfolio positions as of March 31st, near the height of the coronavirus market crash. In this article, we look at what those funds think of Strata Skin Sciences, Inc. (NASDAQ:SSKN) based on that data.
Is Strata Skin Sciences, Inc. (NASDAQ:SSKN) ready to rally soon? The best stock pickers are in a pessimistic mood. The number of long hedge fund positions dropped by 1 recently. Our calculations also showed that SSKN isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks). Video: 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 S&P 500 ETFs by 44 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.
[caption id="attachment_262336" align="aligncenter" width="399"] J. Carlo Cannell of Cannell Capital[/caption]
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, legendary investor Bill Miller told investors to sell 7 extremely popular recession stocks last month. So, we went through his list and recommended another stock with 100% upside potential instead. We interview hedge fund managers and ask them about their best ideas. You can watch our latest hedge fund manager interview here and find out the name of the large-cap healthcare stock that Sio Capital's Michael Castor expects to double. 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. Keeping this in mind we're going to take a look at the recent hedge fund action surrounding Strata Skin Sciences, Inc. (NASDAQ:SSKN).
How have hedgies been trading Strata Skin Sciences, Inc. (NASDAQ:SSKN)?
At Q1's end, a total of 3 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -25% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards SSKN 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.
More specifically, Nantahala Capital Management was the largest shareholder of Strata Skin Sciences, Inc. (NASDAQ:SSKN), with a stake worth $3.1 million reported as of the end of September. Trailing Nantahala Capital Management was Cannell Capital, which amassed a stake valued at $1.4 million. Renaissance Technologies was 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 Cannell Capital allocated the biggest weight to Strata Skin Sciences, Inc. (NASDAQ:SSKN), around 0.56% of its 13F portfolio. Nantahala Capital Management is also relatively very bullish on the stock, setting aside 0.12 percent of its 13F equity portfolio to SSKN.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Broadfin Capital. 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 none of the 750+ hedge funds tracked by Insider Monkey identified SSKN as a viable investment and initiated a position in the stock.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Strata Skin Sciences, Inc. (NASDAQ:SSKN) but similarly valued. We will take a look at Tandy Leather Factory, Inc. (NASDAQ:TLF), Actinium Pharmaceuticals Inc (NYSE:ATNM), Almaden Minerals Ltd. (NYSE:AAU), and Medley Capital Corp (NYSE:MCC). This group of stocks' market caps match SSKN's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position TLF,2,10725,-2 ATNM,4,379,0 AAU,2,1955,-1 MCC,6,1422,1 Average,3.5,3620,-0.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 3.5 hedge funds with bullish positions and the average amount invested in these stocks was $4 million. That figure was $6 million in SSKN's case. Medley Capital Corp (NYSE:MCC) is the most popular stock in this table. On the other hand Tandy Leather Factory, Inc. (NASDAQ:TLF) is the least popular one with only 2 bullish hedge fund positions. Strata Skin Sciences, Inc. (NASDAQ:SSKN) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 7.9% in 2020 through May 22nd and still beat the market by 15.6 percentage points. A small number of hedge funds were also right about betting on SSKN as the stock returned 34.7% during the second quarter and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.