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Amid an overall bull market, many stocks that smart money investors were collectively bullish on surged through November 22nd. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 52% and 49% respectively. Our research shows that most of the stocks that smart money likes historically generate strong risk-adjusted returns. That's why we weren't surprised when hedge funds’ top 20 large-cap stock picks generated a return of 34.7% in 2019 (through November 22) and outperformed the broader market benchmark by 8.5 percentage points.This is why following the smart money sentiment is a useful tool at identifying the next stock to invest in.
PAVmed Inc. (NASDAQ:PAVM) shares haven't seen a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 3 hedge funds' portfolios at the end of September. At the end of this article we will also compare PAVM to other stocks including Arcadia Biosciences, Inc. (NASDAQ:RKDA), Titan Medical Inc. (NASDAQ:TMDI), and Organovo Holdings Inc (NASDAQ:ONVO) to get a better sense of its popularity.
If you'd ask most investors, hedge funds are viewed as unimportant, old investment tools of the past. While there are over 8000 funds trading at the moment, Our experts look at the aristocrats of this club, about 750 funds. These money managers watch over the majority of all hedge funds' total capital, and by monitoring their unrivaled equity investments, Insider Monkey has come up with many investment strategies that have historically defeated the broader indices. Insider Monkey's flagship short hedge fund strategy outpaced the S&P 500 short ETFs by around 20 percentage points a year since its inception in May 2014. Our portfolio of short stocks lost 27.8% since February 2017 (through November 21st) even though the market was up more than 39% during the same period. We just shared a list of 7 short targets in our latest quarterly update .
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Ken Griffin of Citadel Investment Group[/caption]
Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world's most bearish hedge fund that's more convinced than ever that a crash is coming, our long-short investment strategy doesn't rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds' buy/sell signals. Let's analyze the new hedge fund action surrounding PAVmed Inc. (NASDAQ:PAVM).
How have hedgies been trading PAVmed Inc. (NASDAQ:PAVM)?
At Q3's end, a total of 3 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the second quarter of 2019. The graph below displays the number of hedge funds with bullish position in PAVM over the last 17 quarters. With hedgies' capital changing hands, there exists a few key hedge fund managers who were upping their stakes significantly (or already accumulated large positions).
The largest stake in PAVmed Inc. (NASDAQ:PAVM) was held by Sabby Capital, which reported holding $0.9 million worth of stock at the end of September. It was followed by Levin Capital Strategies with a $0.2 million position. The only other hedge fund that is bullish on the company was Citadel Investment Group.
Earlier we told you that the aggregate hedge fund interest in the stock was unchanged and we view this as a negative development. Even though there weren't any hedge funds dumping their holdings during the third quarter, there weren't any hedge funds initiating brand new positions. This indicates that hedge funds, at the very best, perceive this stock as dead money and they haven't identified any viable catalysts that can attract investor attention.
Let's now review hedge fund activity in other stocks similar to PAVmed Inc. (NASDAQ:PAVM). These stocks are Arcadia Biosciences, Inc. (NASDAQ:RKDA), Titan Medical Inc. (NASDAQ:TMDI), Organovo Holdings Inc (NASDAQ:ONVO), and Gulf Resources, Inc. (NASDAQ:GURE). This group of stocks' market valuations resemble PAVM's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position RKDA,3,1239,0 TMDI,4,1492,2 ONVO,8,1998,2 GURE,1,1276,-1 Average,4,1501,0.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 4 hedge funds with bullish positions and the average amount invested in these stocks was $2 million. That figure was $1 million in PAVM's case. Organovo Holdings Inc (NASDAQ:ONVO) is the most popular stock in this table. On the other hand Gulf Resources, Inc. (NASDAQ:GURE) is the least popular one with only 1 bullish hedge fund positions. PAVmed Inc. (NASDAQ:PAVM) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 34.7% in 2019 through November 22nd and outperformed the S&P 500 ETF (SPY) by 8.5 percentage points. Unfortunately PAVM wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); PAVM investors were disappointed as the stock returned -7.7% during the fourth quarter (through 11/22) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 70 percent of these stocks already outperformed the market in Q4.
Disclosure: None. This article was originally published at Insider Monkey.
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