We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn't mean that they don't have occasional colossal losses; they do (like Peltz's recent General Electric losses). However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards Stratasys, Ltd. (NASDAQ:SSYS).
Is Stratasys, Ltd. (NASDAQ:SSYS) a bargain? The smart money is reducing their bets on the stock. The number of long hedge fund bets were cut by 3 lately. Our calculations also showed that SSYS isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
According to most investors, hedge funds are assumed to be slow, outdated investment tools of yesteryear. While there are more than 8000 funds trading at the moment, Our experts hone in on the moguls of this club, around 750 funds. These money managers control the majority of the smart money's total capital, and by observing their matchless picks, Insider Monkey has revealed numerous investment strategies that have historically exceeded the broader indices. Insider Monkey's flagship short hedge fund strategy outrun the S&P 500 short ETFs by around 20 percentage points per annum 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 .
[caption id="attachment_30602" align="aligncenter" width="489"] Philippe Laffont of Coatue Management[/caption]
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world's largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, "I'm investing more today than I did back in early 2009." So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds' buy/sell signals. Let's take a gander at the latest hedge fund action regarding Stratasys, Ltd. (NASDAQ:SSYS).
How have hedgies been trading Stratasys, Ltd. (NASDAQ:SSYS)?
At Q3's end, a total of 13 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -19% from the previous quarter. On the other hand, there were a total of 14 hedge funds with a bullish position in SSYS a year ago. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Stratasys, Ltd. (NASDAQ:SSYS) was held by Fisher Asset Management, which reported holding $53.8 million worth of stock at the end of September. It was followed by Renaissance Technologies with a $21.2 million position. Other investors bullish on the company included GAMCO Investors, D E Shaw, and Coatue Management. In terms of the portfolio weights assigned to each position GAMCO Investors allocated the biggest weight to Stratasys, Ltd. (NASDAQ:SSYS), around 0.09% of its 13F portfolio. PDT Partners is also relatively very bullish on the stock, designating 0.09 percent of its 13F equity portfolio to SSYS.
Seeing as Stratasys, Ltd. (NASDAQ:SSYS) has experienced falling interest from hedge fund managers, it's easy to see that there was a specific group of hedge funds who sold off their full holdings in the third quarter. It's worth mentioning that Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital sold off the largest investment of the 750 funds tracked by Insider Monkey, totaling about $7 million in stock. Ken Griffin's fund, Citadel Investment Group, also dumped its stock, about $1 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest was cut by 3 funds in the third quarter.
Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Stratasys, Ltd. (NASDAQ:SSYS) but similarly valued. These stocks are Veracyte Inc (NASDAQ:VCYT), Southside Bancshares, Inc. (NASDAQ:SBSI), STAAR Surgical Company (NASDAQ:STAA), and Triumph Group Inc (NYSE:TGI). All of these stocks' market caps resemble SSYS's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position VCYT,18,102679,-6 SBSI,7,56884,0 STAA,13,457044,-3 TGI,13,63919,1 Average,12.75,170132,-2 [/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 $170 million. That figure was $109 million in SSYS's case. Veracyte Inc (NASDAQ:VCYT) is the most popular stock in this table. On the other hand Southside Bancshares, Inc. (NASDAQ:SBSI) is the least popular one with only 7 bullish hedge fund positions. Stratasys, Ltd. (NASDAQ:SSYS) is not the most popular stock in this group but hedge fund interest is still above average. 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 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately SSYS wasn't nearly as popular as these 20 stocks and hedge funds that were betting on SSYS were disappointed as the stock returned -13.5% during the fourth quarter (through the end of November) 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.
Disclosure: None. This article was originally published at Insider Monkey.