Billionaire hedge fund managers such as Steve Cohen and Stan Druckenmiller can generate millions or even billions of dollars every year by pinning down high-potential small-cap stocks and pouring cash into these candidates. Small-cap stocks are overlooked by most investors, brokerage houses, and financial services hubs, while the unlimited research abilities of the big players within the hedge fund industry can easily identify the undervalued and high-potential stocks that reside the ignored corners of equity markets. There are numerous small-cap stocks that have turned out to be great winners, which is one of the main reasons the Insider Monkey team pays close attention to the hedge fund activity in relation to these stocks.
Castlight Health Inc (NYSE:CSLT) was in 11 hedge funds’ portfolios at the end of September. CSLT investors should be aware of a decrease in support from the world’s most elite money managers in recent months. There were 12 hedge funds in our database with CSLT holdings at the end of the previous quarter. Our calculations also showed that CSLT isn’t among the 30 most popular stocks among hedge funds.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 6.3% year to date (through December 3rd) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 18 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
We’re going to view the fresh hedge fund action regarding Castlight Health Inc (NYSE:CSLT).
What does the smart money think about Castlight Health Inc (NYSE:CSLT)?
Heading into the fourth quarter of 2018, a total of 11 of the hedge funds tracked by Insider Monkey were long this stock, a change of -8% from one quarter earlier. By comparison, 11 hedge funds held shares or bullish call options in CSLT heading into this year. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Of the funds tracked by Insider Monkey, Lee Ainslie’s Maverick Capital has the number one position in Castlight Health Inc (NYSE:CSLT), worth close to $4.8 million, accounting for 0.1% of its total 13F portfolio. On Maverick Capital’s heels is Chuck Royce of Royce & Associates, with a $2.9 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Other hedge funds and institutional investors with similar optimism comprise Bernard Selz’s Selz Capital, Thomas E. Claugus’s GMT Capital and Jim Simons’s Renaissance Technologies.
Seeing as Castlight Health Inc (NYSE:CSLT) has witnessed falling interest from hedge fund managers, it’s easy to see that there were a few hedgies that decided to sell off their full holdings in the third quarter. Intriguingly, Anand Parekh’s Alyeska Investment Group said goodbye to the largest stake of the “upper crust” of funds monitored by Insider Monkey, worth an estimated $2.1 million in stock. Israel Englander’s fund, Millennium Management, also cut its stock, about $0.9 million worth. These moves are important to note, as total hedge fund interest dropped by 1 funds in the third quarter.
Let’s check out hedge fund activity in other stocks similar to Castlight Health Inc (NYSE:CSLT). These stocks are Denison Mines Corp (NYSEAMEX:DNN), MFS Charter Income Trust (NYSE:MCR), Blackrock MuniHoldings New York (NYSE:MHN), and EverQuote, Inc. (NASDAQ:EVER). This group of stocks’ market caps match CSLT’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| DNN | 3 | 423 | 0 |
| MCR | 1 | 662 | -1 |
| MHN | 3 | 609 | 0 |
| EVER | 10 | 24654 | -4 |
| Average | 4.25 | 6587 | -1.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 4.25 hedge funds with bullish positions and the average amount invested in these stocks was $7 million. That figure was $16 million in CSLT’s case. EverQuote, Inc. (NASDAQ:EVER) is the most popular stock in this table. On the other hand MFS Charter Income Trust (NYSE:MCR) is the least popular one with only 1 bullish hedge fund positions. Compared to these stocks Castlight Health Inc (NYSE:CSLT) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.
Disclosure: None. This article was originally published at Insider Monkey.
