Amid an overall market correction, many stocks that smart money investors were collectively bullish on tanked during the third quarter. Among them, Valeant and Micron ranked among the top 30 picks and both lost around 20%. Citigroup, which was the third most popular stock, lost 10% amid uncertainty regarding the interest rates. Nevertheless, our research shows that most of the stocks that smart money likes historically generate strong risk-adjusted returns. This is why following the smart money sentiment is a useful tool at identifying the next stock to invest in.
Is Rocket Fuel Inc (NASDAQ:FUEL) ready to rally soon? The best stock pickers are taking a bullish view. The number of long hedge fund bets inched up by 1 lately. FUEL was in 10 hedge funds’ portfolios at the end of September. There were 9 hedge funds in our database with FUEL positions at the end of the previous quarter. At the end of this article we will also compare FUEL to other stocks, including Heska Corp (NASDAQ:HSKA), Neuberger Berman High Yield Strateges Fd (NYSEMKT:NHS), and Northrim BanCorp, Inc. (NASDAQ:NRIM) to get a better sense of its popularity.
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According to most investors, hedge funds are seen as unimportant, old financial tools of years past. While there are over an 8000 funds with their doors open at the moment, Our researchers hone in on the crème de la crème of this group, around 700 funds. These hedge fund managers oversee the lion’s share of all hedge funds’ total asset base, and by tailing their highest performing equity investments, Insider Monkey has discovered several investment strategies that have historically outstripped the market. Insider Monkey’s small-cap hedge fund strategy outrun the S&P 500 index by 12 percentage points a year for a decade in their back tests.
With all of this in mind, let’s view the fresh action surrounding Rocket Fuel Inc (NASDAQ:FUEL).
What have hedge funds been doing with Rocket Fuel Inc (NASDAQ:FUEL)?
Heading into Q4, a total of 10 of the hedge funds tracked by Insider Monkey were long this stock, a change of 11% from the previous quarter. With the smart money’s positions undergoing their usual ebb and flow, there exists an “upper tier” of key hedge fund managers who were increasing their holdings 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 number one position in Rocket Fuel Inc (NASDAQ:FUEL), worth close to $3.4 million, comprising less than 0.1%% of its total 13F portfolio. Sitting at the No. 2 spot is Prescott Group Capital Management, managed by Phil Frohlich, which holds a $2 million position; 0.5% of its 13F portfolio is allocated to the company. Remaining members of the smart money that hold long positions encompass Glenn Russell Dubin’s Highbridge Capital Management and Joseph Mathias’s Concourse Capital Management.
As industrywide interest jumped, some big names were breaking ground themselves. Highbridge Capital Management established the most valuable position in Rocket Fuel Inc (NASDAQ:FUEL). Highbridge Capital Management had $1.1 million invested in the company at the end of the quarter. Concourse Capital Management also made a $0.4 million investment in the stock during the quarter. The only other fund with a new position in the stock is Chao Ku’s Nine Chapters Capital Management.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Rocket Fuel Inc (NASDAQ:FUEL) but similarly valued. We will take a look at Heska Corp (NASDAQ:HSKA), Neuberger Berman High Yield Strateges Fd (NYSEMKT:NHS), Northrim BanCorp, Inc. (NASDAQ:NRIM), and Denison Mines Corp (USA) (NYSEAMEX:DNN). All of these stocks’ market caps match FUEL’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| HSKA | 9 | 27219 | 1 |
| NHS | 5 | 21953 | 1 |
| NRIM | 7 | 22074 | -1 |
| DNN | 4 | 1285 | 0 |
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 $18 million. That figure was $10 million in FUEL’s case. Heska Corp (NASDAQ:HSKA) is the most popular stock in this table with 9 funds reporting long positions in the company. On the other hand Denison Mines Corp (USA) (NYSEAMEX:DNN) is the least popular one. Compared to these stocks Rocket Fuel Inc (NASDAQ:FUEL) 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.
