Have Hedge Funds Found A Hidden Gem in CEVA, Inc. (CEVA)?

Reputable billionaire investors such as Nelson Peltz and David Tepper generate exorbitant profits for their wealthy accredited investors (a minimum of $1 million in investable assets would be required to invest in a hedge fund and most successful hedge funds won’t accept your savings unless you commit at least $5 million) by pinpointing winning small-cap stocks. There is little or no publicly-available information at all on some of these small companies, which makes it hard for an individual investor to pin down a winner within the small-cap space. However, hedge funds and other big asset managers can do the due diligence and analysis for you instead, thanks to their highly-skilled research teams and vast resources to conduct an appropriate evaluation process. Looking for potential winners within the small-cap galaxy of stocks? We believe following the smart money is a good starting point.

CEVA, Inc. (NASDAQ:CEVA) has experienced an increase in enthusiasm from smart money in recent months. 17 hedge funds that we track were long the stock on September 30. There were 15 hedge funds in our database with CEVA positions at the end of the previous quarter. At the end of this article we will also compare CEVA to other stocks including Investment Technology Group (NYSE:ITG), EPIQ Systems, Inc. (NASDAQ:EPIQ), and Nautilus, Inc. (NYSE:NLS) to get a better sense of its popularity.

At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.

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What have hedge funds been doing with CEVA, Inc. (NASDAQ:CEVA)?

Heading into the fourth quarter of 2016, a total of 17 of the hedge funds tracked by Insider Monkey were long this stock, a 13% increase from the second quarter of 2016. Below, you can check out the change in hedge fund sentiment towards CEVA over the last 5 quarters, which has been overwhelmingly positive, rising by over 50%. With hedge funds’ sentiment swirling, there exists a few noteworthy hedge fund managers who were boosting their stakes significantly (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, RIMA Senvest Management, led by Richard Mashaal, holds the most valuable position in CEVA, Inc. (NASDAQ:CEVA). RIMA Senvest Management has a $67.7 million position in the stock, comprising 4.9% of its 13F portfolio. The second most bullish fund manager is Driehaus Capital, led by Richard Driehaus, which holds a $15.1 million position. Some other hedge funds and institutional investors with similar optimism consist of Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Jim Simons’ Renaissance Technologies, and John Overdeck and David Siegel’s Two Sigma Advisors. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.

With general bullishness amongst the heavyweights, key hedge funds were breaking ground themselves. Kingdom Ridge Capital, led by Christopher Zepf and Brian Thonn, established the largest position in CEVA, Inc. (NASDAQ:CEVA). Kingdom Ridge Capital had $1.7 million invested in the company at the end of the quarter. Matthew Hulsizer’s PEAK6 Capital Management also initiated a $1 million position during the quarter. The following funds were also among the new CEVA investors: Ken Griffin’s Citadel Investment Group, Mike Vranos’ Ellington, and Peter Algert and Kevin Coldiron’s Algert Coldiron Investors.

Let’s also examine hedge fund activity in other stocks similar to CEVA, Inc. (NASDAQ:CEVA). These stocks are Investment Technology Group (NYSE:ITG), EPIQ Systems, Inc. (NASDAQ:EPIQ), Nautilus, Inc. (NYSE:NLS), and Pace Holdings Corp (NASDAQ:PACE). This group of stocks’ market valuations match CEVA’s market valuation.

As you can see these stocks had an average of 13 hedge funds with bullish positions and the average amount invested in these stocks was $109 million. That figure was $112 million in CEVA’s case. Pace Holdings Corp (NASDAQ:PACE) is the most popular stock in this table. On the other hand EPIQ Systems, Inc. (NASDAQ:EPIQ) is the least popular one with only 9 bullish hedge fund positions. CEVA, Inc. (NASDAQ:CEVA) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard PACE might be a better candidate to consider taking a long position in, though CEVA is one to watch.

Disclosure: None