Do Hedge Funds Love bebe stores, inc. (BEBE)?

A whopping number of 13F filings filed with U.S. Securities and Exchange Commission has been processed by Insider Monkey so that individual investors can look at the overall hedge fund sentiment towards the stocks included in their watchlists. These freshly-submitted public filings disclose money managers’ equity positions as of the end of the three-month period that ended September 30, so let’s proceed with the discussion of the hedge fund sentiment on bebe stores, inc. (NASDAQ:BEBE).

Is bebe stores, inc. (NASDAQ:BEBE) an exceptional investment today? The smart money is reducing their bets on the stock. The number of long hedge fund positions dropped by 5 recently. It might not come as a surprise, considering that the shares of bebe stores, inc. (NASDAQ:BEBE) dropped 53% in the last quarter. While one may find a correlation between both, but it’s hard to validate the same; so, we’ll focus on hedge funds that held stakes in the company at the end of the previous quarter.

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 Universal Stainless & Alloy Products (NASDAQ:USAP), Tandy Leather Factory, Inc. (NASDAQ:TLF), and Yingli Green Energy Hold. Co. Ltd. (ADR) (NYSE:YGE) to gather more data points.

In the financial world, there are a multitude of gauges stock traders put to use to analyze their holdings. Two of the less known gauges are hedge fund and insider trading interest. We have shown that, historically, those who follow the best picks of the best money managers can beat the S&P 500 by a very impressive amount (see the details here).

Now, let’s go over the recent action surrounding bebe stores, inc. (NASDAQ:BEBE).

How have hedgies been trading bebe stores, inc. (NASDAQ:BEBE)?

At the end of the third quarter, a total of 4 of the hedge funds tracked by Insider Monkey held long positions in this stock, a drop of 56% from the previous quarter. With hedgies’ positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Prentice Capital Management, managed by Michael Zimmerman, holds the most valuable position in bebe stores, inc. (NASDAQ:BEBE). Prentice Capital Management has a $2 million position in the stock, comprising 7.6% of its 13F portfolio. Coming in second is Royce & Associates, managed by Chuck Royce, which holds a $1.3 million position; the fund has less than 0.1% of its 13F portfolio invested in the stock. Some other members of the smart money with similar optimism include Renaissance Technologies, and Ken Griffin’s Citadel Investment Group.

Because bebe stores, inc. (NASDAQ:BEBE) has experienced a declination in interest from the entirety of the hedge funds we track, we can see that there was a specific group of funds that decided to sell off their positions entirely in the third quarter. Intriguingly, Cliff Asness’ AQR Capital Management cut the biggest stake of the “upper crust” of funds tracked by Insider Monkey, valued at an estimated $0.6 million in stock, and Mark N. Diker’s Diker Management was right behind this move, as the fund dumped about $0.5 million worth of shares. These bearish behaviors are important to note, as aggregate hedge fund interest dropped by 5 funds in the third quarter.

Let’s go over hedge fund activity in other stocks similar to bebe stores, inc. (NASDAQ:BEBE). These stocks are Universal Stainless & Alloy Products (NASDAQ:USAP), Tandy Leather Factory, Inc. (NASDAQ:TLF), Yingli Green Energy Hold. Co. Ltd. (ADR) (NYSE:YGE), and Key Energy Services, Inc. (NYSE:KEG). This group of stocks’ market values are closest to bebe stores, inc. (NASDAQ:BEBE)’s market value.

As you can see, these stocks had an average of 7 hedge funds with bullish positions and the average amount invested in these stocks was $17 million. That figure was $5 million in bebe stores, inc. (NASDAQ:BEBE)’s case. Key Energy Services, Inc. (NYSE:KEG) is the most popular stock in this table. On the other hand, Tandy Leather Factory, Inc. (NASDAQ:TLF) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks, bebe stores, inc. (NASDAQ:BEBE) is even less popular than Tandy Leather Factory, Inc. (NASDAQ:TLF). Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case, more research is warranted.