There are several ways to beat the market, and investing in small cap stocks has historically been one of them. We like to improve the odds of beating the market further by examining what famous hedge fund operators such as Carl Icahn and George Soros think. Those hedge fund operators make billions of dollars each year by hiring the best and the brightest to do research on stocks, including small cap stocks that big brokerage houses simply don’t cover. Because of Carl Icahn and other elite funds’ exemplary historical records, we pay attention to their small cap picks. In this article, we use hedge fund filing data to analyze 8×8, Inc. (NASDAQ:EGHT).
Hedge fund interest in 8×8, Inc. (NASDAQ:EGHT) shares was flat at the end of last quarter. This is usually a negative indicator. At the end of this article we will also compare EGHT to other stocks including AAON, Inc. (NASDAQ:AAON), Extraction Oil & Gas, Inc. (NASDAQ:XOG), and First Bancorp (NYSE:FBP) to get a better sense of its popularity.
Today there are a multitude of indicators shareholders use to appraise their stock investments. Two of the less utilized indicators are hedge fund and insider trading sentiment. Our researchers have shown that, historically, those who follow the best picks of the top hedge fund managers can beat the S&P 500 by a healthy amount (see the details here).
Let’s analyze the latest hedge fund action surrounding 8×8, Inc. (NASDAQ:EGHT).
How are hedge funds trading 8×8, Inc. (NASDAQ:EGHT)?
Heading into the fourth quarter of 2018, a total of 18 of the hedge funds tracked by Insider Monkey were long this stock, representing no change from one quarter earlier. The graph below displays the number of hedge funds with bullish position in EGHT over the last 13 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).
More specifically, Polar Capital was the largest shareholder of 8×8, Inc. (NASDAQ:EGHT), with a stake worth $32.4 million reported as of the end of September. Trailing Polar Capital was Citadel Investment Group, which amassed a stake valued at $28.2 million. Southpoint Capital Advisors, Point72 Asset Management, and Sabrepoint Capital were also very fond of the stock, giving the stock large weights in their portfolios.
Seeing as 8×8, Inc. (NASDAQ:EGHT) has faced bearish sentiment from the entirety of the hedge funds we track, it’s safe to say that there lies a certain “tier” of funds who were dropping their entire stakes heading into Q3. Interestingly, Dennis Puri and Oliver Keller’s Hunt Lane Capital said goodbye to the largest stake of the 700 funds monitored by Insider Monkey, comprising about $32.1 million in stock. Peter S. Park’s fund, Park West Asset Management, also dropped its stock, about $20.1 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as 8×8, Inc. (NYSE:EGHT) but similarly valued. We will take a look at AAON, Inc. (NASDAQ:AAON), Extraction Oil & Gas, Inc. (NASDAQ:XOG), First Bancorp (NYSE:FBP), and Lithia Motors Inc (NYSE:LAD). This group of stocks’ market caps are closest to EGHT’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| AAON | 5 | 7080 | 0 |
| XOG | 20 | 289200 | -1 |
| FBP | 18 | 256853 | 2 |
| LAD | 19 | 436448 | 4 |
| Average | 15.5 | 247395 | 1.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 15.5 hedge funds with bullish positions and the average amount invested in these stocks was $247 million. That figure was $156 million in EGHT’s case. Extraction Oil & Gas, Inc. (NASDAQ:XOG) is the most popular stock in this table. On the other hand AAON, Inc. (NASDAQ:AAON) is the least popular one with only 5 bullish hedge fund positions. 8×8, Inc. (NYSE:EGHT) 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 XOG might be a better candidate to consider a long position.
Disclosure: None. This article was originally published at Insider Monkey.
