Last year we predicted the arrival of the first US recession since 2009 and we told in advance that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Fidus Investment Corp (NASDAQ:FDUS).
Fidus Investment Corp (NASDAQ:FDUS) was in 5 hedge funds' portfolios at the end of the first quarter of 2021. The all time high for this statistic is 8. FDUS shareholders have witnessed an increase in activity from the world's largest hedge funds lately. There were 4 hedge funds in our database with FDUS holdings at the end of December. Our calculations also showed that FDUS isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings).
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 115 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.
John Overdeck of Two Sigma
John Overdeck of Two Sigma Advisors
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, an activist hedge fund owns nearly 40% of this $23 biotech stock and is trying to buy the rest for around $50. So, we recommended a long position to our monthly premium newsletter subscribers. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. With all of this in mind we're going to analyze the latest hedge fund action encompassing Fidus Investment Corp (NASDAQ:FDUS).
Do Hedge Funds Think FDUS Is A Good Stock To Buy Now?
At the end of March, a total of 5 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 25% from the previous quarter. By comparison, 8 hedge funds held shares or bullish call options in FDUS a year ago. 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, Arrowstreet Capital held the most valuable stake in Fidus Investment Corp (NASDAQ:FDUS), which was worth $5.1 million at the end of the fourth quarter. On the second spot was Two Sigma Advisors which amassed $3.3 million worth of shares. D E Shaw, Citadel Investment Group, and Citadel Investment Group 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 Pinz Capital allocated the biggest weight to Fidus Investment Corp (NASDAQ:FDUS), around 0.03% of its 13F portfolio. Two Sigma Advisors is also relatively very bullish on the stock, setting aside 0.01 percent of its 13F equity portfolio to FDUS.
As industrywide interest jumped, key money managers were breaking ground themselves. Citadel Investment Group, managed by Ken Griffin, established the most valuable call position in Fidus Investment Corp (NASDAQ:FDUS). Citadel Investment Group had $0.2 million invested in the company at the end of the quarter. Matthew L Pinz's Pinz Capital also made a $0.1 million investment in the stock during the quarter.
Let's now take a look at hedge fund activity in other stocks similar to Fidus Investment Corp (NASDAQ:FDUS). We will take a look at CalAmp Corp. (NASDAQ:CAMP), Aeglea BioTherapeutics, Inc. (NASDAQ:AGLE), PennantPark Investment Corp. (NASDAQ:PNNT), Spark Energy, Inc. (NASDAQ:SPKE), Tufin Software Technologies Ltd. (NYSE:TUFN), Regional Management Corp (NYSE:RM), and Landos Biopharma, Inc. (NASDAQ:LABP). This group of stocks' market values are closest to FDUS's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CAMP,11,248319,0 AGLE,18,153254,0 PNNT,8,22098,0 SPKE,4,12101,0 TUFN,6,10947,-3 RM,10,72384,-2 LABP,11,182497,11 Average,9.7,100229,0.9 [/table]
As you can see these stocks had an average of 9.7 hedge funds with bullish positions and the average amount invested in these stocks was $100 million. That figure was $10 million in FDUS's case. Aeglea BioTherapeutics, Inc. (NASDAQ:AGLE) is the most popular stock in this table. On the other hand Spark Energy, Inc. (NASDAQ:SPKE) is the least popular one with only 4 bullish hedge fund positions. Fidus Investment Corp (NASDAQ:FDUS) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for FDUS is 28.3. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 17.4% in 2021 through June 18th and beat the market by 6.1 percentage points. A small number of hedge funds were also right about betting on FDUS, though not to the same extent, as the stock returned 9.9% since the end of Q1 (through June 18th) and outperformed the market.
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Disclosure: None. This article was originally published at Insider Monkey.
