Looking for stocks with high upside potential? Just follow the big players within the hedge fund industry. Why should you do so? Let’s take a brief look at what statistics have to say about hedge funds’ stock picking abilities to illustrate. The Standard and Poor’s 500 Index returned approximately 13.1% in the 2.5 months of 2019 (including dividend payments). Conversely, hedge funds’ 15 preferred S&P 500 stocks generated a return of 19.7% during the same period, with 93% of these stock picks outperforming the broader market benchmark. Coincidence? It might happen to be so, but it is unlikely. Our research covering the last 18 years indicates that hedge funds' stock picks generate superior risk-adjusted returns. That's why we believe it is wise to check hedge fund activity before you invest your time or your savings on a stock like Qualys Inc (NASDAQ:QLYS).
Qualys Inc (NASDAQ:QLYS) was in 17 hedge funds' portfolios at the end of December. QLYS investors should pay attention to a decrease in support from the world's most elite money managers lately. There were 18 hedge funds in our database with QLYS holdings at the end of the previous quarter. Our calculations also showed that QLYS isn't among the 30 most popular stocks among hedge funds.
At the moment there are a multitude of gauges investors have at their disposal to evaluate stocks. Two of the best gauges are hedge fund and insider trading signals. Our researchers have shown that, historically, those who follow the top picks of the top hedge fund managers can outclass the market by a significant margin (see the details here).
Let's analyze the fresh hedge fund action encompassing Qualys Inc (NASDAQ:QLYS).
Hedge fund activity in Qualys Inc (NASDAQ:QLYS)
At Q4's end, a total of 17 of the hedge funds tracked by Insider Monkey were long this stock, a change of -6% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards QLYS over the last 14 quarters. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Panayotis Takis Sparaggis's Alkeon Capital Management has the biggest position in Qualys Inc (NASDAQ:QLYS), worth close to $67.5 million, amounting to 0.4% of its total 13F portfolio. The second most bullish fund manager is Jim Simons of Renaissance Technologies, with a $65.7 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Some other hedge funds and institutional investors that hold long positions comprise Cliff Asness's AQR Capital Management, Joel Greenblatt's Gotham Asset Management and Israel Englander's Millennium Management.
Judging by the fact that Qualys Inc (NASDAQ:QLYS) has experienced declining sentiment from the aggregate hedge fund industry, logic holds that there were a few fund managers that slashed their full holdings in the third quarter. Intriguingly, D. E. Shaw's D E Shaw cut the biggest position of the 700 funds monitored by Insider Monkey, worth about $3.6 million in stock, and Phil Frohlich's Prescott Group Capital Management was right behind this move, as the fund said goodbye to about $2 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest fell by 1 funds in the third quarter.
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Qualys Inc (NASDAQ:QLYS) but similarly valued. We will take a look at Sabra Health Care REIT Inc (NASDAQ:SBRA), Newfield Exploration Co. (NYSE:NFX), Bank OZK (NASDAQ:OZK), and Physicians Realty Trust (NYSE:DOC). This group of stocks' market valuations resemble QLYS's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SBRA,15,82224,6 NFX,34,330966,-5 OZK,18,216630,8 DOC,12,93423,3 Average,19.75,180811,3 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 19.75 hedge funds with bullish positions and the average amount invested in these stocks was $181 million. That figure was $180 million in QLYS's case. Newfield Exploration Co. (NYSE:NFX) is the most popular stock in this table. On the other hand Physicians Realty Trust (NYSE:DOC) is the least popular one with only 12 bullish hedge fund positions. Qualys Inc (NASDAQ:QLYS) 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 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Unfortunately QLYS wasn't nearly as popular as these 15 stock (hedge fund sentiment was quite bearish); QLYS investors were disappointed as the stock returned 10.7% and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 15 most popular stocks) among hedge funds as 13 of these stocks already outperformed the market this year.
Disclosure: None. This article was originally published at Insider Monkey.