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Is Innodata Inc (INOD) Stock A Good Buy?

·6 min read

We at Insider Monkey have gone over 866 13F filings that hedge funds and prominent investors are required to file by the SEC. The 13F filings show the funds' and investors' portfolio positions as of March 31st. In this article, we look at what those funds think of Innodata Inc (NASDAQ:INOD) based on that data.

Is INOD a good stock to buy? Hedge fund interest in Innodata Inc (NASDAQ:INOD) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that INOD isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings). 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 C&F Financial Corp (NASDAQ:CFFI), Bancroft Fund Limited (NYSE:BCV), and USD Partners LP (NYSE:USDP) to gather more data points.

In the financial world there are a lot of gauges market participants use to analyze stocks. A pair of the less utilized gauges are hedge fund and insider trading moves. We have shown that, historically, those who follow the best picks of the best money managers can outpace their index-focused peers by a significant margin (see the details here). Also, our monthly newsletter's portfolio of long stock picks returned 206.8% since March 2017 (through May 2021) and beat the S&P 500 Index by more than 115 percentage points. You can download a sample issue of this newsletter on our website .

Fred DiSanto Ancora Advisors
Fred DiSanto Ancora Advisors

Fred DiSanto of Ancora Advisors

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, an activist hedge fund wants to buy this $28 biotech stock for $50. So, we recommended a long position to our monthly premium newsletter subscribers. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. With all of this in mind we're going to take a gander at the key hedge fund action surrounding Innodata Inc (NASDAQ:INOD).

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

At the end of March, a total of 4 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the previous quarter. On the other hand, there were a total of 3 hedge funds with a bullish position in INOD a year ago. With hedge funds' capital changing hands, there exists a select group of notable hedge fund managers who were adding to their holdings substantially (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Renaissance Technologies, holds the number one position in Innodata Inc (NASDAQ:INOD). Renaissance Technologies has a $6.8 million position in the stock, comprising less than 0.1%% of its 13F portfolio. Coming in second is Ken Griffin of Citadel Investment Group, with a $0.2 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Other members of the smart money that are bullish encompass Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital, Frederick DiSanto's Ancora Advisors and . In terms of the portfolio weights assigned to each position Renaissance Technologies allocated the biggest weight to Innodata Inc (NASDAQ:INOD), around 0.01% of its 13F portfolio. Arrowstreet Capital is also relatively very bullish on the stock, designating 0.0002 percent of its 13F equity portfolio to INOD.

We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Millennium Management. One hedge fund selling its entire position doesn't always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don't think this is the case in this case because only one of the 800+ hedge funds tracked by Insider Monkey identified as a viable investment and initiated a position in the stock (that fund was Citadel Investment Group).

Let's now review hedge fund activity in other stocks similar to Innodata Inc (NASDAQ:INOD). These stocks are C&F Financial Corp (NASDAQ:CFFI), Bancroft Fund Limited (NYSE:BCV), USD Partners LP (NYSE:USDP), Portman Ridge Finance Corporation (NASDAQ:PTMN), Usio, Inc. (NASDAQ:USIO), Metacrine, Inc. (NASDAQ:MTCR), and Concert Pharmaceuticals Inc (NASDAQ:CNCE). This group of stocks' market values are closest to INOD's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CFFI,2,5942,0 BCV,1,52,0 USDP,2,521,0 PTMN,9,4829,0 USIO,5,19032,1 MTCR,7,7864,0 CNCE,14,39225,-4 Average,5.7,11066,-0.4 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 5.7 hedge funds with bullish positions and the average amount invested in these stocks was $11 million. That figure was $7 million in INOD's case. Concert Pharmaceuticals Inc (NASDAQ:CNCE) is the most popular stock in this table. On the other hand Bancroft Fund Limited (NYSE:BCV) is the least popular one with only 1 bullish hedge fund positions. Innodata Inc (NASDAQ:INOD) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for INOD is 46.5. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 17.2% in 2021 through June 11th and still beat the market by 3.3 percentage points. A small number of hedge funds were also right about betting on INOD as the stock returned 14.9% since the end of the first quarter (through 6/11) 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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