Hedge funds don't get the respect they used to get. Nowadays investors prefer passive funds over actively managed funds. One thing they don't realize is that 100% of the passive funds didn't see the coronavirus recession coming, but a lot of hedge funds did. Even we published an article near the end of February and predicted a US recession. Think about all the losses you could have avoided if you sold your shares in February and bought them back at the end of March. In this article we will take a closer look at the hedge fund sentiment surrounding 3D Systems Corporation (NYSE:DDD).
Is 3D Systems Corporation (NYSE:DDD) the right pick for your portfolio? The smart money is becoming more confident. The number of bullish hedge fund positions advanced by 6 lately. Our calculations also showed that DDD isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings). DDD was in 19 hedge funds' portfolios at the end of the fourth quarter of 2019. There were 13 hedge funds in our database with DDD holdings at the end of the previous quarter.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by more than 41 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'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 35.3% through March 3rd. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
[caption id="attachment_673876" align="aligncenter" width="399"] John Overdeck of Two Sigma Advisors[/caption]
We leave no stone unturned when looking for the next great investment idea. For example, this investor can predict short term winners following earnings announcements with high accuracy, so we check out his stock picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we're going to view the new hedge fund action surrounding 3D Systems Corporation (NYSE:DDD).
Hedge fund activity in 3D Systems Corporation (NYSE:DDD)
At Q4's end, a total of 19 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 46% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards DDD over the last 18 quarters. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in 3D Systems Corporation (NYSE:DDD) was held by D E Shaw, which reported holding $27.3 million worth of stock at the end of September. It was followed by Renaissance Technologies with a $5 million position. Other investors bullish on the company included Arrowstreet Capital, Citadel Investment Group, and Royce & Associates. In terms of the portfolio weights assigned to each position Weld Capital Management allocated the biggest weight to 3D Systems Corporation (NYSE:DDD), around 0.32% of its 13F portfolio. Cinctive Capital Management is also relatively very bullish on the stock, designating 0.13 percent of its 13F equity portfolio to DDD.
Now, key money managers were breaking ground themselves. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, established the most valuable position in 3D Systems Corporation (NYSE:DDD). Arrowstreet Capital had $3.9 million invested in the company at the end of the quarter. Minhua Zhang's Weld Capital Management also initiated a $1.6 million position during the quarter. The other funds with brand new DDD positions are Richard SchimeláandáLawrence Sapanski's Cinctive Capital Management, John Overdeck and David Siegel's Two Sigma Advisors, and Michael Gelband's ExodusPoint Capital.
Let's check out hedge fund activity in other stocks - not necessarily in the same industry as 3D Systems Corporation (NYSE:DDD) but similarly valued. These stocks are Hanger, Inc. (NYSE:HNGR), OneSpaWorld Holdings Limited (NASDAQ:OSW), Five Point Holdings, LLC (NYSE:FPH), and MAG Silver Corporation (NYSE:MAG). This group of stocks' market caps resemble DDD's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position HNGR,15,82071,-1 OSW,11,114086,3 FPH,15,216718,1 MAG,10,45280,-2 Average,12.75,114539,0.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 12.75 hedge funds with bullish positions and the average amount invested in these stocks was $115 million. That figure was $49 million in DDD's case. Hanger, Inc. (NYSE:HNGR) is the most popular stock in this table. On the other hand MAG Silver Corporation (NYSE:MAG) is the least popular one with only 10 bullish hedge fund positions. Compared to these stocks 3D Systems Corporation (NYSE:DDD) is more popular among hedge funds. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 1.3% in 2020 through May 1st but still managed to beat the market by 12.9 percentage points. Hedge funds were also right about betting on DDD, though not to the same extent, as the stock returned -11.2% in 2020 (through May 1st) and outperformed the market as well. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.