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In this article we will check out the progression of hedge fund sentiment towards Strata Skin Sciences, Inc. (NASDAQ:SSKN) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.
Hedge fund interest in Strata Skin Sciences, Inc. (NASDAQ:SSKN) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that SSKN 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). The level and the change in hedge fund popularity aren't the only variables you need to analyze to decipher hedge funds' perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That's why at the end of this article we will examine companies such as AMREP Corporation (NYSE:AXR), Trinity Place Holdings Inc. (NYSE:TPHS), and 1895 Bancorp of Wisconsin, Inc. (NASDAQ:BCOW) to gather more data points.
Video: Watch our video about the top 5 most popular hedge fund stocks.
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 S&P 500 ETFs by more than 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. 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.
Wil Harkey of Nantahala Capital Management
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 10 most profitable companies in the world 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. With all of this in mind we're going to view the key hedge fund action regarding Strata Skin Sciences, Inc. (NASDAQ:SSKN).
What does smart money think about Strata Skin Sciences, Inc. (NASDAQ:SSKN)?
At Q3's end, a total of 3 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from one quarter earlier. By comparison, 4 hedge funds held shares or bullish call options in SSKN a year ago. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
When looking at the institutional investors followed by Insider Monkey, Wilmot B. Harkey and Daniel Mack's Nantahala Capital Management has the biggest position in Strata Skin Sciences, Inc. (NASDAQ:SSKN), worth close to $6.3 million, comprising 0.2% of its total 13F portfolio. The second largest stake is held by Renaissance Technologies, which holds a $1.9 million position; less than 0.1%% of its 13F portfolio is allocated to the company. In terms of the portfolio weights assigned to each position Cannell Capital allocated the biggest weight to Strata Skin Sciences, Inc. (NASDAQ:SSKN), around 0.51% of its 13F portfolio. Nantahala Capital Management is also relatively very bullish on the stock, setting aside 0.19 percent of its 13F equity portfolio to SSKN.
Earlier we told you that the aggregate hedge fund interest in the stock was unchanged and we view this as a negative development. Even though there weren't any hedge funds dumping their holdings during the third quarter, there weren't any hedge funds initiating brand new positions. This indicates that hedge funds, at the very best, perceive this stock as dead money and they haven't identified any viable catalysts that can attract investor attention.
Let's now review hedge fund activity in other stocks similar to Strata Skin Sciences, Inc. (NASDAQ:SSKN). We will take a look at AMREP Corporation (NYSE:AXR), Trinity Place Holdings Inc. (NYSE:TPHS), 1895 Bancorp of Wisconsin, Inc. (NASDAQ:BCOW), Yatra Online, Inc. (NASDAQ:YTRA), Happiness Biotech Group Limited (NASDAQ:HAPP), Village Bank and Trust Financial Corp. (NASDAQ:VBFC), and CLPS Incorporation (NASDAQ:CLPS). This group of stocks' market valuations are similar to SSKN's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position AXR,2,1452,0 TPHS,6,20472,0 BCOW,2,159,0 YTRA,8,15460,-3 HAPP,2,602,0 VBFC,1,767,0 CLPS,1,118,0 Average,3.1,5576,-0.4 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 3.1 hedge funds with bullish positions and the average amount invested in these stocks was $6 million. That figure was $10 million in SSKN's case. Yatra Online, Inc. (NASDAQ:YTRA) is the most popular stock in this table. On the other hand Village Bank and Trust Financial Corp. (NASDAQ:VBFC) is the least popular one with only 1 bullish hedge fund positions. Strata Skin Sciences, Inc. (NASDAQ:SSKN) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for SSKN is 34.3. 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. 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 28.1% in 2020 through November 23rd and still beat the market by 15.4 percentage points. A small number of hedge funds were also right about betting on SSKN as the stock returned 10.4% since the end of the third quarter (through 11/23) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.
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