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Is Remark Holdings, Inc. (MARK) Going To Burn These Hedge Funds ?

Abigail Fisher

Before putting in our own effort and resources into finding a good investment, we can quickly utilize hedge fund expertise to give us a quick glimpse of whether that stock could make for a good addition to our portfolios. The odds are not exactly stacked in investors' favor when it comes to beating the market, as evidenced by the fact that less than 49% of the stocks in the S&P 500 did so during the third quarter. The stats were even worse in recent years when most of the advances in the market were due to large gains by FAANG stocks. However, one bright side for individual investors was the strong performance of hedge funds' top consensus picks. This year hedge funds' top 20 stock picks outperformed the S&P 500 Index by 8.5 percentage points through November 22nd. Thus, we can see that the tireless research and efforts of hedge funds to identify winning stocks can work to our advantage when we know how to use the data. While not all of their picks will be winners, our odds are much better following their best stock picks than trying to go it alone.

Remark Holdings, Inc. (NASDAQ:MARK) investors should pay attention to an increase in support from the world's most elite money managers lately. MARK was in 3 hedge funds' portfolios at the end of September. There were 2 hedge funds in our database with MARK positions at the end of the previous quarter. Our calculations also showed that MARK isn't among the 30 most popular stocks among hedge funds.

So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 Russell 2000 ETFs by 40 percentage points since May 2014 (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. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.

[caption id="attachment_26286" align="aligncenter" width="359"] Jim Simons Founder of Renaissance Technologies[/caption]

RENAISSANCE TECHNOLOGIES

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. We're going to review the fresh hedge fund action surrounding Remark Holdings, Inc. (NASDAQ:MARK).

What have hedge funds been doing with Remark Holdings, Inc. (NASDAQ:MARK)?

At the end of the third quarter, a total of 3 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 50% from one quarter earlier. By comparison, 3 hedge funds held shares or bullish call options in MARK a year ago. With hedgies' sentiment swirling, there exists an "upper tier" of notable hedge fund managers who were upping their holdings significantly (or already accumulated large positions).

MARK_nov2019

The largest stake in Remark Holdings, Inc. (NASDAQ:MARK) was held by Laurion Capital Management, which reported holding $2.4 million worth of stock at the end of September. It was followed by Manatuck Hill Partners with a $0.3 million position. The only other hedge fund that is bullish on the company was Renaissance Technologies.

With a general bullishness amongst the heavyweights, key money managers have jumped into Remark Holdings, Inc. (NASDAQ:MARK) headfirst. Laurion Capital Management, managed by Benjamin A. Smith, created the most valuable position in Remark Holdings, Inc. (NASDAQ:MARK). Laurion Capital Management had $2.4 million invested in the company at the end of the quarter. Mark Broach's Manatuck Hill Partners also initiated a $0.3 million position during the quarter. The only other fund with a new position in the stock is Renaissance Technologies founded by Jim Simons.

Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Remark Holdings, Inc. (NASDAQ:MARK) but similarly valued. These stocks are Soleno Therapeutics, Inc. (NASDAQ:SLNO), Mid-Southern Bancorp, Inc. (NASDAQ:MSVB), PFSweb, Inc. (NASDAQ:PFSW), and Build-A-Bear Workshop, Inc (NYSE:BBW). This group of stocks' market caps are similar to MARK's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SLNO,5,8308,0 MSVB,5,5584,0 PFSW,6,5448,1 BBW,12,9450,1 Average,7,7198,0.5 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 7 hedge funds with bullish positions and the average amount invested in these stocks was $7 million. That figure was $3 million in MARK's case. Build-A-Bear Workshop, Inc (NYSE:BBW) is the most popular stock in this table. On the other hand Soleno Therapeutics, Inc. (NASDAQ:SLNO) is the least popular one with only 5 bullish hedge fund positions. Compared to these stocks Remark Holdings, Inc. (NASDAQ:MARK) is even less popular than SLNO. Hedge funds dodged a bullet by taking a bearish stance towards MARK. Our calculations showed that the top 20 most popular hedge fund stocks returned 34.7% in 2019 through November 22nd and outperformed the S&P 500 ETF (SPY) by 8.5 percentage points. Unfortunately MARK wasn't nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); MARK investors were disappointed as the stock returned -38.1% 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 so far in Q4.

Disclosure: None. This article was originally published at Insider Monkey.

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