At the end of February we announced the arrival of the first US recession since 2009 and we predicted 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 Alimera Sciences Inc (NASDAQ:ALIM).
Is Alimera Sciences Inc (NASDAQ:ALIM) the right pick for your portfolio? The smart money was getting more optimistic. The number of long hedge fund positions rose by 1 recently. Alimera Sciences Inc (NASDAQ:ALIM) was in 6 hedge funds' portfolios at the end of September. The all time high for this statistics is 11. Our calculations also showed that ALIM 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 was 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'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 17th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
William Leland Edwards of Palo Alto Investors
William Leland Edwards of Palo Alto Investors
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. Now we're going to review the latest hedge fund action encompassing Alimera Sciences Inc (NASDAQ:ALIM).
What does smart money think about Alimera Sciences Inc (NASDAQ:ALIM)?
At the end of September, a total of 6 of the hedge funds tracked by Insider Monkey were long this stock, a change of 20% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in ALIM over the last 21 quarters. With hedgies' sentiment swirling, there exists an "upper tier" of key hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).
Among these funds, Avoro Capital Advisors (venBio Select Advisor) held the most valuable stake in Alimera Sciences Inc (NASDAQ:ALIM), which was worth $2 million at the end of the third quarter. On the second spot was Palo Alto Investors which amassed $1 million worth of shares. Renaissance Technologies, Dorset Management, and Deerfield Management 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 Dorset Management allocated the biggest weight to Alimera Sciences Inc (NASDAQ:ALIM), around 0.23% of its 13F portfolio. Palo Alto Investors is also relatively very bullish on the stock, dishing out 0.05 percent of its 13F equity portfolio to ALIM.
Now, key money managers were breaking ground themselves. Deerfield Management, managed by James E. Flynn, assembled the most valuable position in Alimera Sciences Inc (NASDAQ:ALIM). Deerfield Management had $0.3 million invested in the company at the end of the quarter.
Let's also examine hedge fund activity in other stocks similar to Alimera Sciences Inc (NASDAQ:ALIM). We will take a look at Salem Media Group Inc. (NASDAQ:SALM), Psychemedics Corp. (NASDAQ:PMD), J. Jill, Inc. (NYSE:JILL), Midatech Pharma PLC (NASDAQ:MTP), Charles & Colvard, Ltd. (NASDAQ:CTHR), Navios Maritime Holdings Inc. (NYSE:NM), and Sypris Solutions, Inc. (NASDAQ:SYPR). This group of stocks' market valuations are similar to ALIM's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SALM,2,424,0 PMD,4,3002,0 JILL,3,795,-5 MTP,1,275,0 CTHR,1,1314,-1 NM,2,1452,-1 SYPR,2,1013,1 Average,2.1,1182,-0.9 [/table]
As you can see these stocks had an average of 2.1 hedge funds with bullish positions and the average amount invested in these stocks was $1 million. That figure was $4 million in ALIM's case. Psychemedics Corp. (NASDAQ:PMD) is the most popular stock in this table. On the other hand Midatech Pharma PLC (NASDAQ:MTP) is the least popular one with only 1 bullish hedge fund positions. Compared to these stocks Alimera Sciences Inc (NASDAQ:ALIM) is more popular among hedge funds. Our overall hedge fund sentiment score for ALIM is 72.4. 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 30.7% in 2020 through November 27th and still beat the market by 16.1 percentage points. Unfortunately ALIM wasn't nearly as popular as these 20 stocks and hedge funds that were betting on ALIM were disappointed as the stock returned -3.1% since the end of the third quarter (through 11/27) 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 most of these stocks already outperformed the market in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.
