Is Control4 Corp (NASDAQ:CTRL) a good stock to buy right now? We at Insider Monkey like to examine what billionaires and hedge funds think of a company before doing days of research on it. Given their 2 and 20 payment structure, hedge funds have more resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also have numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.
Is Control4 Corp (NASDAQ:CTRL) a bargain? Money managers are buying. The number of bullish hedge fund positions rose by 2 recently. Our calculations also showed that CTRL isn’t among the 30 most popular stocks among hedge funds. CTRL was in 12 hedge funds’ portfolios at the end of September. There were 10 hedge funds in our database with CTRL holdings at the end of the previous quarter.
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 market by 18 percentage points since May 2014 through December 3, 2018 (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 our short portfolio.
We’re going to go over the fresh hedge fund action encompassing Control4 Corp (NASDAQ:CTRL).
Hedge fund activity in Control4 Corp (NASDAQ:CTRL)
Heading into the fourth quarter of 2018, a total of 12 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 20% from the second quarter of 2018. By comparison, 12 hedge funds held shares or bullish call options in CTRL heading into this year. So, let’s review 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 Control4 Corp (NASDAQ:CTRL), with a stake worth $23.5 million reported as of the end of September. Trailing Renaissance Technologies was Driehaus Capital, which amassed a stake valued at $16.6 million. AQR Capital Management, Skylands Capital, and Marshall Wace LLP were also very fond of the stock, giving the stock large weights in their portfolios.
As industrywide interest jumped, some big names have been driving this bullishness. Driehaus Capital, managed by Richard Driehaus, established the most valuable position in Control4 Corp (NASDAQ:CTRL). Driehaus Capital had $16.6 million invested in the company at the end of the quarter. Paul Marshall and Ian Wace’s Marshall Wace LLP also initiated a $3.7 million position during the quarter. The following funds were also among the new CTRL investors: Steve Cohen’s Point72 Asset Management, Ken Griffin’s Citadel Investment Group, and John Overdeck and David Siegel’s Two Sigma Advisors.
Let’s now take a look at hedge fund activity in other stocks similar to Control4 Corp (NASDAQ:CTRL). We will take a look at Hersha Hospitality Trust (NYSE:HT), Perficient, Inc. (NASDAQ:PRFT), XO Group Inc (NYSE:XOXO), and Goldman Sachs BDC, Inc. (NYSE:GSBD). This group of stocks’ market caps are closest to CTRL’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| HT | 8 | 23969 | -2 |
| PRFT | 19 | 33366 | 9 |
| XOXO | 17 | 141303 | 5 |
| GSBD | 4 | 5145 | 0 |
| Average | 12 | 50946 | 3 |
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 $51 million. That figure was $64 million in CTRL’s case. Perficient, Inc. (NASDAQ:PRFT) is the most popular stock in this table. On the other hand Goldman Sachs BDC, Inc. (NYSE:GSBD) is the least popular one with only 4 bullish hedge fund positions. Control4 Corp (NASDAQ:CTRL) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard PRFT might be a better candidate to consider a long position.
Disclosure: None. This article was originally published at Insider Monkey.
