Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds' and successful investors' positions as of the end of the first quarter. You can find articles about an individual hedge fund's trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 4.5 years and analyze what the smart money thinks of Portman Ridge Finance Corporation (NASDAQ:PTMN) based on that data.
Portman Ridge Finance Corporation (NASDAQ:PTMN) investors should be aware of an increase in support from the world's most elite money managers recently. Our calculations also showed that PTMN 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.
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 58 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_341463" align="aligncenter" width="398"] Paul Isaac of Arbiter Partners Capital Management[/caption]
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out trades like this one. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. 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 the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we're going to take a look at the new hedge fund action encompassing Portman Ridge Finance Corporation (NASDAQ:PTMN).
How have hedgies been trading Portman Ridge Finance Corporation (NASDAQ:PTMN)?
At the end of the first quarter, a total of 8 of the hedge funds tracked by Insider Monkey were long this stock, a change of 33% from one quarter earlier. By comparison, 2 hedge funds held shares or bullish call options in PTMN a year ago. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Callodine Capital Management was the largest shareholder of Portman Ridge Finance Corporation (NASDAQ:PTMN), with a stake worth $2.1 million reported as of the end of September. Trailing Callodine Capital Management was Roumell Asset Management, which amassed a stake valued at $0.7 million. Arrowstreet Capital, Fondren Management, and Arbiter Partners Capital Management 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 Roumell Asset Management allocated the biggest weight to Portman Ridge Finance Corporation (NASDAQ:PTMN), around 1.91% of its 13F portfolio. Callodine Capital Management is also relatively very bullish on the stock, earmarking 0.87 percent of its 13F equity portfolio to PTMN.
As industrywide interest jumped, key money managers were breaking ground themselves. Roumell Asset Management, managed by Jim Roumell, assembled the most valuable position in Portman Ridge Finance Corporation (NASDAQ:PTMN). Roumell Asset Management had $0.7 million invested in the company at the end of the quarter. Paul J. Isaac's Arbiter Partners Capital Management also initiated a $0.2 million position during the quarter. The only other fund with a new position in the stock is Ken Griffin's Citadel Investment Group.
Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Portman Ridge Finance Corporation (NASDAQ:PTMN) but similarly valued. We will take a look at TESSCO Technologies, Inc. (NASDAQ:TESS), Communications Systems, Inc. (NASDAQ:JCS), Onconova Therapeutics, Inc. (NASDAQ:ONTX), and Apollo Endosurgery, Inc. (NASDAQ:APEN). All of these stocks' market caps resemble PTMN's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position TESS,2,3368,-3 JCS,3,6388,-1 ONTX,1,55,-3 APEN,5,7698,0 Average,2.75,4377,-1.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 2.75 hedge funds with bullish positions and the average amount invested in these stocks was $4 million. That figure was $4 million in PTMN's case. Apollo Endosurgery, Inc. (NASDAQ:APEN) is the most popular stock in this table. On the other hand Onconova Therapeutics, Inc. (NASDAQ:ONTX) is the least popular one with only 1 bullish hedge fund positions. Compared to these stocks Portman Ridge Finance Corporation (NASDAQ:PTMN) is more popular among hedge funds. 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 returned 12.2% in 2020 through June 17th but still managed to beat the market by 14.8 percentage points. Hedge funds were also right about betting on PTMN as the stock returned 40.6% so far in Q2 (through June 17th) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
Disclosure: None. This article was originally published at Insider Monkey.