Out of thousands of stocks that are currently traded on the market, it is difficult to identify those that will really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of nearly 900 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has the potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about IRIDEX Corporation (NASDAQ:IRIX).
Is IRIX a good stock to buy? Money managers were in a bullish mood. The number of bullish hedge fund bets went up by 1 recently. IRIDEX Corporation (NASDAQ:IRIX) was in 3 hedge funds' portfolios at the end of the first quarter of 2021. The all time high for this statistic is 6. Our calculations also showed that IRIX isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings).
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. Hedge funds have more than $3.5 trillion in assets under management, so you can't expect their entire portfolios to beat the market by large margins. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 115 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds' moves today.
Peter Algert of Algert Global
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, an activist hedge fund wants to buy this $26 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. Now we're going to analyze the fresh hedge fund action encompassing IRIDEX Corporation (NASDAQ:IRIX).
Do Hedge Funds Think IRIX Is A Good Stock To Buy Now?
At Q1's end, a total of 3 of the hedge funds tracked by Insider Monkey were long this stock, a change of 50% from the fourth quarter of 2020. The graph below displays the number of hedge funds with bullish position in IRIX over the last 23 quarters. With hedgies' positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were boosting 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 has the most valuable position in IRIDEX Corporation (NASDAQ:IRIX), worth close to $4.3 million, corresponding to less than 0.1%% of its total 13F portfolio. Sitting at the No. 2 spot is Invenomic Capital Management, led by Ali Motamed, holding a $1.1 million position; 0.2% of its 13F portfolio is allocated to the stock. In terms of the portfolio weights assigned to each position Invenomic Capital Management allocated the biggest weight to IRIDEX Corporation (NASDAQ:IRIX), around 0.24% of its 13F portfolio. Algert Global is also relatively very bullish on the stock, setting aside 0.04 percent of its 13F equity portfolio to IRIX.
With a general bullishness amongst the heavyweights, key money managers have been driving this bullishness. Algert Global, managed by Peter Algert, established the biggest position in IRIDEX Corporation (NASDAQ:IRIX). Algert Global had $0.1 million invested in the company at the end of the quarter.
Let's also examine hedge fund activity in other stocks similar to IRIDEX Corporation (NASDAQ:IRIX). These stocks are Amplify Energy Corp. (NYSE:AMPY), Inpixon (NASDAQ:INPX), U.S. Global Investors, Inc. (NASDAQ:GROW), AgroFresh Solutions Inc (NASDAQ:AGFS), RYB Education, Inc. (NYSE:RYB), Forum Energy Technologies Inc (NYSE:FET), and Magal Security Systems Ltd. (NASDAQ:MAGS). This group of stocks' market valuations match IRIX's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position AMPY,12,12532,3 INPX,4,649,1 GROW,7,12564,2 AGFS,5,1957,4 RYB,2,6360,-1 FET,5,4086,2 MAGS,2,3403,0 Average,5.3,5936,1.6 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 5.3 hedge funds with bullish positions and the average amount invested in these stocks was $6 million. That figure was $6 million in IRIX's case. Amplify Energy Corp. (NYSE:AMPY) is the most popular stock in this table. On the other hand RYB Education, Inc. (NYSE:RYB) is the least popular one with only 2 bullish hedge fund positions. IRIDEX Corporation (NASDAQ:IRIX) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for IRIX is 26. 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 IRIX as the stock returned 14.7% 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.