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Is IIIN A Good Stock To Buy Now?

·6 min read

Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips or bumps on the charts usually don't make them change their opinion towards a company. This time it may be different. The coronavirus pandemic destroyed the high correlations among major industries and asset classes. We are now in a stock pickers market where fundamentals of a stock have more effect on the price than the overall direction of the market. As a result we observe sudden and large changes in hedge fund positions depending on the news flow. Let’s take a look at the hedge fund sentiment towards Insteel Industries Inc (NASDAQ:IIIN) to find out whether there were any major changes in hedge funds' views.

Is IIIN a good stock to buy now? The best stock pickers were turning bullish. The number of bullish hedge fund positions went up by 1 in recent months. Insteel Industries Inc (NASDAQ:IIIN) was in 9 hedge funds' portfolios at the end of the third quarter of 2020. The all time high for this statistics is 19. Our calculations also showed that IIIN 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).

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

In the eyes of most stock holders, hedge funds are viewed as worthless, old investment tools of years past. While there are over 8000 funds in operation at the moment, Our experts hone in on the leaders of this group, approximately 850 funds. These hedge fund managers preside over the lion's share of the hedge fund industry's total capital, and by observing their highest performing stock picks, Insider Monkey has formulated a few investment strategies that have historically outrun the market. Insider Monkey's flagship short hedge fund strategy exceeded the S&P 500 short ETFs by around 20 percentage points per annum since its inception in March 2017. Our portfolio of short stocks lost 13% since February 2017 (through November 17th) even though the market was up 65% during the same period. We just shared a list of 6 short targets in our latest quarterly update .

David Siegel of Two Sigma Advisors
David Siegel of Two Sigma Advisors

David Siegel of Two Sigma Advisors

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 15 best blue chip stocks 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. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. With all of this in mind let's check out the new hedge fund action surrounding Insteel Industries Inc (NASDAQ:IIIN).

Do Hedge Funds Think IIIN Is A Good Stock To Buy Now?

At third quarter's end, a total of 9 of the hedge funds tracked by Insider Monkey were long this stock, a change of 13% from the second quarter of 2020. By comparison, 3 hedge funds held shares or bullish call options in IIIN a year ago. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Royce & Associates held the most valuable stake in Insteel Industries Inc (NASDAQ:IIIN), which was worth $12 million at the end of the third quarter. On the second spot was AQR Capital Management which amassed $3.1 million worth of shares. Arrowstreet Capital, Two Sigma Advisors, and D E Shaw 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 Value Holdings LP allocated the biggest weight to Insteel Industries Inc (NASDAQ:IIIN), around 0.34% of its 13F portfolio. Royce & Associates is also relatively very bullish on the stock, setting aside 0.13 percent of its 13F equity portfolio to IIIN.

As industrywide interest jumped, key hedge funds have jumped into Insteel Industries Inc (NASDAQ:IIIN) headfirst. Ancora Advisors, managed by Frederick DiSanto, initiated the biggest position in Insteel Industries Inc (NASDAQ:IIIN). Ancora Advisors had $0.4 million invested in the company at the end of the quarter.

Let's now review hedge fund activity in other stocks similar to Insteel Industries Inc (NASDAQ:IIIN). These stocks are Akebia Therapeutics Inc (NASDAQ:AKBA), NextDecade Corporation (NASDAQ:NEXT), Crescent Capital BDC, Inc. (NASDAQ:CCAP), PDL BioPharma Inc. (NASDAQ:PDLI), Interface, Inc. (NASDAQ:TILE), Dorchester Minerals LP (NASDAQ:DMLP), and Chatham Lodging Trust (NYSE:CLDT). All of these stocks' market caps resemble IIIN's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position AKBA,18,59298,-7 NEXT,5,261490,-2 CCAP,6,51922,2 PDLI,15,107581,-1 TILE,17,16681,-2 DMLP,5,14096,-1 CLDT,12,29274,-2 Average,11.1,77192,-1.9 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 11.1 hedge funds with bullish positions and the average amount invested in these stocks was $77 million. That figure was $22 million in IIIN's case. Akebia Therapeutics Inc (NASDAQ:AKBA) is the most popular stock in this table. On the other hand NextDecade Corporation (NASDAQ:NEXT) is the least popular one with only 5 bullish hedge fund positions. Insteel Industries Inc (NASDAQ:IIIN) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for IIIN is 35.6. 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 32.9% in 2020 through December 8th and still beat the market by 16.2 percentage points. A small number of hedge funds were also right about betting on IIIN as the stock returned 38.4% since the end of the third quarter (through 12/8) and outperformed the market by an even larger margin.

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

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