Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that's why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to smartest analysts and expensive data/information sources that individual investors can't match. So should one consider investing in IMAX Corporation (NYSE:IMAX)? The smart money sentiment can provide an answer to this question.
Is IMAX Corporation (NYSE:IMAX) a healthy stock for your portfolio? Prominent investors are becoming less hopeful. The number of bullish hedge fund bets dropped by 3 recently. Our calculations also showed that IMAX isn't among the 30 most popular stocks among hedge funds (see the video below). Video: Click the image to 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 market by 40 percentage points since May 2014 through May 30, 2019 (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.
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn't rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We're going to go over the new hedge fund action encompassing IMAX Corporation (NYSE:IMAX).
What have hedge funds been doing with IMAX Corporation (NYSE:IMAX)?
At the end of the second quarter, a total of 12 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -20% from the first quarter of 2019. Below, you can check out the change in hedge fund sentiment towards IMAX over the last 16 quarters. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to Insider Monkey's hedge fund database, Renaissance Technologies has the number one position in IMAX Corporation (NYSE:IMAX), worth close to $16.9 million, accounting for less than 0.1%% of its total 13F portfolio. The second largest stake is held by Israel Englander of Millennium Management, with a $5.8 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Some other peers that are bullish comprise Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital, Ken Griffin's Citadel Investment Group and John Overdeck and David Siegel's Two Sigma Advisors.
Judging by the fact that IMAX Corporation (NYSE:IMAX) has witnessed declining sentiment from the aggregate hedge fund industry, it's easy to see that there lies a certain "tier" of hedge funds that elected to cut their full holdings last quarter. It's worth mentioning that Mike Vranos's Ellington said goodbye to the largest investment of the 750 funds monitored by Insider Monkey, totaling close to $0.4 million in stock, and J. Daniel Plants's Voce Capital was right behind this move, as the fund dropped about $0.3 million worth. These moves are interesting, as total hedge fund interest fell by 3 funds last quarter.
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as IMAX Corporation (NYSE:IMAX) but similarly valued. These stocks are Vicor Corporation (NASDAQ:VICR), Avaya Holdings Corp. (NYSE:AVYA), National HealthCare Corporation (NYSE:NHC), and Orion Engineered Carbons SA (NYSE:OEC). This group of stocks' market valuations resemble IMAX's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position VICR,13,20339,3 AVYA,42,309525,2 NHC,9,58048,0 OEC,17,269481,-6 Average,20.25,164348,-0.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 20.25 hedge funds with bullish positions and the average amount invested in these stocks was $164 million. That figure was $44 million in IMAX's case. Avaya Holdings Corp. (NYSE:AVYA) is the most popular stock in this table. On the other hand National HealthCare Corporation (NYSE:NHC) is the least popular one with only 9 bullish hedge fund positions. IMAX Corporation (NYSE:IMAX) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. A small number of hedge funds were also right about betting on IMAX as the stock returned 8.7% during the same time frame and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.