Do Hedge Funds Love Inuvo, Inc. (INUV)?

Between June 25 and October 30th the Russell 2000 ETF (IWM) lagged the larger S&P 500 ETF (SPY) by more than 14 percentage points as investors worried over the possible ramifications of rising interest rates. The hedge funds and institutional investors we track typically invest more in smaller-cap stocks than an average investor, and we have seen data that shows those funds paring back their overall exposure. Those funds cutting positions in small-caps is one reason why volatility has increased. In the following paragraphs, we take a closer look at what hedge funds and prominent investors think of Inuvo, Inc. (NYSEMKT:INUV) and see how the stock is affected by the recent hedge fund activity.

Inuvo, Inc. was in 4 hedge funds’ portfolios at the end of September. INUV investors should be aware of a decrease in hedge fund sentiment lately. There were 5 hedge funds in our database with INUV positions at the end of the previous quarter. At the end of this article we will also compare INUV to other stocks including TransAct Technologies Incorporated (NASDAQ:TACT), Arch Coal Inc (NYSE:ACI), and Timmins Gold Corp (NYSEMKT:TGD) to get a better sense of its popularity.

According to most shareholders, hedge funds are viewed as slow, outdated financial tools of the past. While there are greater than 8000 funds trading at the moment, Our researchers hone in on the moguls of this group, about 700 funds. It is estimated that this group of investors oversee bulk of the hedge fund industry’s total capital, and by tracking their best equity investments, Insider Monkey has revealed several investment strategies that have historically outpaced Mr. Market. Insider Monkey’s small-cap hedge fund strategy outstripped the S&P 500 index by 12 percentage points per year for a decade in their back tests.

With all of this in mind, let’s go over the latest action regarding Inuvo, Inc. (NYSEMKT:INUV).

How have hedgies been trading Inuvo, Inc. (NYSEMKT:INUV)?

At the end of the third quarter, a total of 4 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -20% from the second quarter. With hedge funds’ capital changing hands, there exists an “upper tier” of key hedge fund managers who were boosting their stakes significantly (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Jim Simons’ Renaissance Technologies has the biggest position in Inuvo, Inc. (NYSEMKT:INUV), worth close to $2.9 million, corresponding to less than 0.1%% of its total 13F portfolio. Sitting at the No. 2 spot is Coe Capital Management, managed by Mark Coe, which holds a $1.3 million position; 0.5% of its 13F portfolio is allocated to the company. The remaining members of the smart money with similar optimism contain Peter Algert and Kevin Coldiron’s Algert Coldiron Investors and Dmitry Balyasny’s Balyasny Asset Management.

Judging by the fact that Inuvo, Inc. (NYSEMKT:INUV) has witnessed bearish sentiment from the smart money, it’s safe to say that there lies a certain “tier” of fund managers that decided to sell off their full holdings by the end of the third quarter. At the top of the heap, Cliff Asness’ AQR Capital Management dropped the largest investment of the “upper crust” of funds watched by Insider Monkey, valued at about $0.1 million in stock, and Ken Griffin’s Citadel Investment Group was right behind this move, as the fund sold off about $0 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest was cut by 1 funds by the end of the third quarter.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Inuvo, Inc. (NYSEMKT:INUV) but similarly valued. These stocks are TransAct Technologies Incorporated (NASDAQ:TACT), Arch Coal Inc (NYSE:ACI), Timmins Gold Corp (NYSEMKT:TGD), and MediciNova, Inc. (NASDAQ:MNOV). This group of stocks’ market values are similar to INUV’s market value.

As you can see these stocks had an average of 6 hedge funds with bullish positions and the average amount invested in these stocks was $4 million. That figure was $5 million in INUV’s case. Arch Coal Inc (NYSE:ACI) is the most popular stock in this table and MediciNova, Inc. (NASDAQ:MNOV) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks Inuvo, Inc. (NYSEMKT:INUV) is even less popular than MNOV. 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 required.