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Is HTG Molecular Diagnostics, Inc. (HTGM) A Good Stock To Buy?

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The financial regulations require hedge funds and wealthy investors that exceeded the $100 million equity holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn't the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds' positions on September 30th, about a month before the elections. We at Insider Monkey have made an extensive database of more than 817 of those established hedge funds and famous value investors' filings. In this article, we analyze how these elite funds and prominent investors traded HTG Molecular Diagnostics, Inc. (NASDAQ:HTGM) based on those filings.

Hedge fund interest in HTG Molecular Diagnostics, Inc. (NASDAQ:HTGM) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that HTGM isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks). The level and the change in hedge fund popularity aren't the only variables you need to analyze to decipher hedge funds' perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That's why at the end of this article we will examine companies such as Document Security Systems, Inc. (NYSE:DSS), Optical Cable Corporation (NASDAQ:OCC), and Solitario Zinc Corp. (NYSE:XPL) to gather more data points.

Video: Watch our video about the top 5 most popular hedge fund stocks.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 66 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'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 17th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Ken Griffin CITADEL INVESTMENT GROUP
Ken Griffin CITADEL INVESTMENT GROUP

Ken Griffin of Citadel Investment Group

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. Now let's take a gander at the fresh hedge fund action regarding HTG Molecular Diagnostics, Inc. (NASDAQ:HTGM).

Hedge fund activity in HTG Molecular Diagnostics, Inc. (NASDAQ:HTGM)

At the end of the third quarter, a total of 4 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in HTGM over the last 21 quarters. With hedgies' sentiment swirling, there exists an "upper tier" of key hedge fund managers who were increasing their holdings meaningfully (or already accumulated large positions).

According to Insider Monkey's hedge fund database, Nantahala Capital Management, managed by Wilmot B. Harkey and Daniel Mack, holds the most valuable position in HTG Molecular Diagnostics, Inc. (NASDAQ:HTGM). Nantahala Capital Management has a $1.7 million position in the stock, comprising 0.1% of its 13F portfolio. The second largest stake is held by Renaissance Technologies, holding a $0.5 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Remaining members of the smart money that hold long positions include David Harding's Winton Capital Management, Ken Griffin's Citadel Investment Group and Ken Griffin's Citadel Investment Group. In terms of the portfolio weights assigned to each position Nantahala Capital Management allocated the biggest weight to HTG Molecular Diagnostics, Inc. (NASDAQ:HTGM), around 0.05% of its 13F portfolio. Winton Capital Management is also relatively very bullish on the stock, setting aside 0.002 percent of its 13F equity portfolio to HTGM.

Earlier we told you that the aggregate hedge fund interest in the stock was unchanged and we view this as a negative development. Even though there weren't any hedge funds dumping their holdings during the third quarter, there weren't any hedge funds initiating brand new positions. This indicates that hedge funds, at the very best, perceive this stock as dead money and they haven't identified any viable catalysts that can attract investor attention.

Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as HTG Molecular Diagnostics, Inc. (NASDAQ:HTGM) but similarly valued. These stocks are Document Security Systems, Inc. (NYSE:DSS), Optical Cable Corporation (NASDAQ:OCC), Solitario Zinc Corp. (NYSE:XPL), Permianville Royalty Trust (NYSE:PVL), Ballantyne Strong Inc (NYSE:BTN), DPW Holdings, Inc. (NYSE:DPW), and Spring Bank Pharmaceuticals, Inc. (NASDAQ:SBPH). This group of stocks' market values resemble HTGM's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position DSS,1,74,-1 OCC,1,388,0 XPL,1,375,-1 PVL,1,39,0 BTN,2,5311,0 DPW,2,144,1 SBPH,3,2038,0 Average,1.6,1196,-0.1 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 1.6 hedge funds with bullish positions and the average amount invested in these stocks was $1 million. That figure was $2 million in HTGM's case. Spring Bank Pharmaceuticals, Inc. (NASDAQ:SBPH) is the most popular stock in this table. On the other hand Document Security Systems, Inc. (NYSE:DSS) is the least popular one with only 1 bullish hedge fund positions. Compared to these stocks HTG Molecular Diagnostics, Inc. (NASDAQ:HTGM) is more popular among hedge funds. Our overall hedge fund sentiment score for HTGM is 67. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 30.7% in 2020 through November 27th and still beat the market by 16.1 percentage points. Unfortunately HTGM wasn't nearly as popular as these 20 stocks and hedge funds that were betting on HTGM were disappointed as the stock returned -4.8% since the end of the third quarter (through 11/27) 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 most of these stocks already outperformed the market in 2020.

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Disclosure: None. This article was originally published at Insider Monkey.

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