We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional 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. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let's examine the smart money sentiment towards Meridian Bioscience, Inc. (NASDAQ:VIVO) and determine whether hedge funds skillfully traded this stock.
Meridian Bioscience, Inc. (NASDAQ:VIVO) investors should pay attention to an increase in enthusiasm from smart money recently. VIVO was in 20 hedge funds' portfolios at the end of March. There were 17 hedge funds in our database with VIVO holdings at the end of the previous quarter. Our calculations also showed that VIVO isn't among the 30 most popular stocks among hedge funds (click for Q1 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.
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 58 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.
Joel Greenblatt of Gotham Asset Management
At Insider Monkey we scour multiple sources to uncover the next great investment idea. Hedge fund sentiment towards Tesla reached its all time high at the end of 2019 and Tesla shares more than tripled this year. We are trying to identify other EV revolution winners, so we are checking out this under-the-radar lithium stock. 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. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. Now let's review the new hedge fund action surrounding Meridian Bioscience, Inc. (NASDAQ:VIVO).
How have hedgies been trading Meridian Bioscience, Inc. (NASDAQ:VIVO)?
At the end of the first quarter, a total of 20 of the hedge funds tracked by Insider Monkey were long this stock, a change of 18% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards VIVO over the last 18 quarters. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Renaissance Technologies was the largest shareholder of Meridian Bioscience, Inc. (NASDAQ:VIVO), with a stake worth $26.5 million reported as of the end of September. Trailing Renaissance Technologies was Millennium Management, which amassed a stake valued at $9.8 million. D E Shaw, AQR Capital Management, 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 Zebra Capital Management allocated the biggest weight to Meridian Bioscience, Inc. (NASDAQ:VIVO), around 1.13% of its 13F portfolio. Factorial Partners is also relatively very bullish on the stock, dishing out 0.09 percent of its 13F equity portfolio to VIVO.
Consequently, some big names have been driving this bullishness. Balyasny Asset Management, managed by Dmitry Balyasny, created the largest position in Meridian Bioscience, Inc. (NASDAQ:VIVO). Balyasny Asset Management had $1.7 million invested in the company at the end of the quarter. Greg Eisner's Engineers Gate Manager also made a $0.1 million investment in the stock during the quarter. The other funds with new positions in the stock are Michael Gelband's ExodusPoint Capital and Joel Greenblatt's Gotham Asset Management.
Let's now review hedge fund activity in other stocks similar to Meridian Bioscience, Inc. (NASDAQ:VIVO). We will take a look at Universal Logistics Holdings, Inc. (NASDAQ:ULH), Designer Brands Inc. (NYSE:DBI), Crinetics Pharmaceuticals, Inc. (NASDAQ:CRNX), and Star Group L.P. (NYSE:SGU). This group of stocks' market valuations are similar to VIVO's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ULH,8,15656,-3 DBI,21,28950,-1 CRNX,11,166354,-1 SGU,8,65781,1 Average,12,69185,-1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 12 hedge funds with bullish positions and the average amount invested in these stocks was $69 million. That figure was $57 million in VIVO's case. Designer Brands Inc. (NYSE:DBI) is the most popular stock in this table. On the other hand Universal Logistics Holdings, Inc. (NASDAQ:ULH) is the least popular one with only 8 bullish hedge fund positions. Meridian Bioscience, Inc. (NASDAQ:VIVO) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 18.6% in 2020 through July 27th but still beat the market by 17.1 percentage points. Hedge funds were also right about betting on VIVO as the stock returned 194.2% since Q1 and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.
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