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 Exfo Inc (NASDAQ:EXFO).
Is EXFO a good stock to buy? Money managers were turning bullish. The number of bullish hedge fund positions moved up by 2 lately. Exfo Inc (NASDAQ:EXFO) was in 3 hedge funds' portfolios at the end of March. The all time high for this statistic is 3. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that EXFO 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. 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 S&P 500 ETFs by 115 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 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.
Mario Gabelli of GAMCO Investors
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 let's check out the fresh hedge fund action regarding Exfo Inc (NASDAQ:EXFO).
Do Hedge Funds Think EXFO Is A Good Stock To Buy Now?
Heading into the second quarter of 2021, a total of 3 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 200% from one quarter earlier. On the other hand, there were a total of 1 hedge funds with a bullish position in EXFO a year ago. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Of the funds tracked by Insider Monkey, Renaissance Technologies, holds the largest position in Exfo Inc (NASDAQ:EXFO). Renaissance Technologies has a $4.5 million position in the stock, comprising less than 0.1%% of its 13F portfolio. Coming in second is AIGH Investment Partners, managed by Orin Hirschman, which holds a $2.2 million position; 0.5% of its 13F portfolio is allocated to the stock. In terms of the portfolio weights assigned to each position AIGH Investment Partners allocated the biggest weight to Exfo Inc (NASDAQ:EXFO), around 0.47% of its 13F portfolio. Renaissance Technologies is also relatively very bullish on the stock, earmarking 0.01 percent of its 13F equity portfolio to EXFO.
Consequently, specific money managers have jumped into Exfo Inc (NASDAQ:EXFO) headfirst. AIGH Investment Partners, managed by Orin Hirschman, assembled the largest position in Exfo Inc (NASDAQ:EXFO). AIGH Investment Partners had $2.2 million invested in the company at the end of the quarter. Mario Gabelli's GAMCO Investors also made a $0.1 million investment in the stock during the quarter.
Let's now take a look at hedge fund activity in other stocks similar to Exfo Inc (NASDAQ:EXFO). These stocks are BrasilAgro - Companhia Brasileira de Propriedades Agrícolas (NYSE:LND), Mammoth Energy Services, Inc. (NASDAQ:TUSK), Golar LNG Partners LP (NASDAQ:GMLP), AVEO Pharmaceuticals, Inc. (NASDAQ:AVEO), Bassett Furniture Industries Inc. (NASDAQ:BSET), Surgalign Holdings, Inc. (NASDAQ:SRGA), and T2 Biosystems Inc (NASDAQ:TTOO). This group of stocks' market caps resemble EXFO's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position LND,1,195,1 TUSK,8,120688,-2 GMLP,10,21977,2 AVEO,15,31435,4 BSET,9,42759,-2 SRGA,15,27912,-1 TTOO,9,6938,3 Average,9.6,35986,0.7 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 9.6 hedge funds with bullish positions and the average amount invested in these stocks was $36 million. That figure was $7 million in EXFO's case. AVEO Pharmaceuticals, Inc. (NASDAQ:AVEO) is the most popular stock in this table. On the other hand BrasilAgro - Companhia Brasileira de Propriedades Agrícolas (NYSE:LND) is the least popular one with only 1 bullish hedge fund positions. Exfo Inc (NASDAQ:EXFO) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for EXFO is 44.1. 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 EXFO as the stock returned 39% 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.