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The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 817 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds' and investors' portfolio positions as of September 30th, about a month before the elections. In this article we look at what those investors think of SurModics, Inc. (NASDAQ:SRDX).
SurModics, Inc. (NASDAQ:SRDX) has seen an increase in activity from the world's largest hedge funds recently. SurModics, Inc. (NASDAQ:SRDX) was in 17 hedge funds' portfolios at the end of the third quarter of 2020. The all time high for this statistic is 17. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that SRDX isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
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 66 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.
Chuck Royce of Royce & Associates
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. 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 website. Keeping this in mind we're going to analyze the latest hedge fund action encompassing SurModics, Inc. (NASDAQ:SRDX).
Do Hedge Funds Think SRDX Is A Good Stock To Buy Now?
At the end of September, a total of 17 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 13% from the second quarter of 2020. Below, you can check out the change in hedge fund sentiment towards SRDX over the last 21 quarters. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Trigran Investments held the most valuable stake in SurModics, Inc. (NASDAQ:SRDX), which was worth $68.6 million at the end of the third quarter. On the second spot was Renaissance Technologies which amassed $34.6 million worth of shares. Royce & Associates, Soleus Capital, and Two Sigma Advisors were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Trigran Investments allocated the biggest weight to SurModics, Inc. (NASDAQ:SRDX), around 12.42% of its 13F portfolio. Soleus Capital is also relatively very bullish on the stock, earmarking 1.59 percent of its 13F equity portfolio to SRDX.
As one would reasonably expect, key hedge funds have been driving this bullishness. GLG Partners, managed by Noam Gottesman, established the most outsized position in SurModics, Inc. (NASDAQ:SRDX). GLG Partners had $0.7 million invested in the company at the end of the quarter. David Harding's Winton Capital Management also made a $0.2 million investment in the stock during the quarter. The only other fund with a brand new SRDX position is Gavin Saitowitz and Cisco J. del Valle's Prelude Capital (previously Springbok Capital).
Let's check out hedge fund activity in other stocks - not necessarily in the same industry as SurModics, Inc. (NASDAQ:SRDX) but similarly valued. We will take a look at Washington Trust Bancorp, Inc. (NASDAQ:WASH), Scholar Rock Holding Corporation (NASDAQ:SRRK), Vanda Pharmaceuticals Inc. (NASDAQ:VNDA), Hycroft Mining Holding Corporation (NASDAQ:HYMC), Radius Health Inc (NASDAQ:RDUS), Yintech Investment Holdings Limited (NASDAQ:YIN), and Mitek Systems, Inc. (NASDAQ:MITK). All of these stocks' market caps match SRDX's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position WASH,11,22334,-1 SRRK,4,55800,-1 VNDA,22,170926,3 HYMC,13,353809,6 RDUS,22,124511,1 YIN,3,998,2 MITK,20,88835,1 Average,13.6,116745,1.6 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 13.6 hedge funds with bullish positions and the average amount invested in these stocks was $117 million. That figure was $132 million in SRDX's case. Vanda Pharmaceuticals Inc. (NASDAQ:VNDA) is the most popular stock in this table. On the other hand Yintech Investment Holdings Limited (NASDAQ:YIN) is the least popular one with only 3 bullish hedge fund positions. SurModics, Inc. (NASDAQ:SRDX) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for SRDX is 73.8. 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. This is a slightly positive signal but 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 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 30.7% in 2020 through December 14th and beat the market again by 15.8 percentage points. Unfortunately SRDX wasn't nearly as popular as these 20 stocks and hedge funds that were betting on SRDX were disappointed as the stock returned -1.2% since the end of September (through 12/14) 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 many of these stocks already outperformed the market so far this year.
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Disclosure: None. This article was originally published at Insider Monkey.