Hedge funds are known to underperform the bull markets but that's not because they are bad at investing. 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. Hedge funds underperform because they are hedged. The Standard and Poor’s 500 Index returned approximately 26.2% through November 22nd (including dividend payments). Conversely, hedge funds’ top 20 large-cap stock picks generated a return of 34.7% during the same period. An average long/short hedge fund returned only a fraction of this due to the hedges they implement and the large fees they charge. Our research covering the last 18 years indicates that investors can outperform the market by imitating hedge funds' consensus stock picks rather than directly investing in hedge funds. 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 Vislink Technologies, Inc. (NASDAQ:VISL).
Is Vislink Technologies, Inc. (NASDAQ:VISL) ready to rally soon? Money managers are betting on the stock. The number of long hedge fund bets improved by 1 recently. Our calculations also showed that VISL 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 Russell 2000 ETFs by 40 percentage points since May 2014 (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_26340" align="aligncenter" width="594"] Ken Griffin of Citadel Investment Group[/caption]
Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world's most bearish hedge fund that's more convinced than ever that a crash is coming, our long-short investment strategy doesn't rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds' buy/sell signals. We're going to take a gander at the fresh hedge fund action surrounding Vislink Technologies, Inc. (NASDAQ:VISL).
Hedge fund activity in Vislink Technologies, Inc. (NASDAQ:VISL)
Heading into the fourth quarter of 2019, a total of 3 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 50% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards VISL over the last 17 quarters. With hedge funds' sentiment swirling, there exists a select group of notable hedge fund managers who were adding to their stakes substantially (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Renaissance Technologies holds the number one position in Vislink Technologies, Inc. (NASDAQ:VISL). Renaissance Technologies has a $0.2 million position in the stock, comprising less than 0.1%% of its 13F portfolio. The second most bullish fund manager is Hal Mintz of Sabby Capital, with a $0.1 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. In terms of the portfolio weights assigned to each position Sabby Capital allocated the biggest weight to Vislink Technologies, Inc. (NASDAQ:VISL), around 0.03% of its portfolio. Renaissance Technologies is also relatively very bullish on the stock, setting aside 0.0002 percent of its 13F equity portfolio to VISL.
With a general bullishness amongst the heavyweights, key hedge funds were leading the bulls' herd. Sabby Capital, managed by Hal Mintz, initiated the largest position in Vislink Technologies, Inc. (NASDAQ:VISL). Sabby Capital had $0.1 million invested in the company at the end of the quarter.
Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Vislink Technologies, Inc. (NASDAQ:VISL) but similarly valued. These stocks are SAExploration Holdings, Inc. (NASDAQ:SAEX), Novus Therapeutics, Inc. (NASDAQ:NVUS), Genius Brands International, Inc. (NASDAQ:GNUS), and Can-Fite Biopharma Ltd (NYSE:CANF). This group of stocks' market valuations are closest to VISL's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SAEX,5,1548,-1 NVUS,5,3157,0 GNUS,1,11,0 CANF,1,48,0 Average,3,1191,-0.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 3 hedge funds with bullish positions and the average amount invested in these stocks was $1 million. That figure was $0 million in VISL's case. SAExploration Holdings, Inc. (NASDAQ:SAEX) is the most popular stock in this table. On the other hand Genius Brands International, Inc. (NASDAQ:GNUS) is the least popular one with only 1 bullish hedge fund positions. Vislink Technologies, Inc. (NASDAQ:VISL) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 34.7% in 2019 through November 22nd and outperformed the S&P 500 ETF (SPY) by 8.5 percentage points. Unfortunately VISL wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); VISL investors were disappointed as the stock returned -43.4% during the fourth quarter (through 11/22) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 70 percent of these stocks already outperformed the market in Q4.
Disclosure: None. This article was originally published at Insider Monkey.