Hedge Funds Are Dumping Cambridge Capital Acquisition Corp (CAMB)

The third quarter was a rough one for most investors, as fears of an interest rate hike in the U.S, a weakening economy in China, and a stagnant Europe, weighed heavily on the minds of investors. Both the S&P 500 and Russell 2000 sank as a result, with the Russell 2000, which is composed of smaller companies, being hit especially hard. This was primarily due to hedge funds, which are big supporters of small-cap stocks, pulling some of their capital out of the volatile markets during this time. Let’s look at how this market volatility affected the sentiment of hedge funds towards Cambridge Capital Acquisition Corp (NASDAQ:CAMB), and what that likely means for the prospects of the company and its stock.

Cambridge Capital Acquisition Corp shareholders have witnessed a decrease in activity from the world’s largest hedge funds recently. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity, but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Horizon Technology Finance Corp (NASDAQ:HRZN), Evans Bancorp Inc. (NYSEMKT:EVBN), and Unique Fabricating Inc (NYSEMKT:UFAB) to gather more data points.

If you’d ask most stock holders, hedge funds are viewed as unimportant, outdated financial vehicles of years past. While there are greater than 8000 funds in operation at present, Our researchers hone in on the moguls of this club, about 700 funds. It is estimated that this group of investors oversee most of the hedge fund industry’s total capital, and by tracking their highest performing stock picks, Insider Monkey has brought to light 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 per year for a decade in their back tests.

Keeping this in mind, we’re going to go over the key action encompassing Cambridge Capital Acquisition Corp (NASDAQ:CAMB).

How have hedgies been trading Cambridge Capital Acquisition Corp (NASDAQ:CAMB)?

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 drop of 20% from the previous quarter. With hedge funds’ positions undergoing their usual ebb and flow, there exists an “upper tier” of key hedge fund managers who were upping their stakes considerably (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Seneca Capital, managed by Douglas Hirsch, holds the number one position in Cambridge Capital Acquisition Corp (NASDAQ:CAMB). Seneca Capital has a $2.8 million position in the stock, comprising 1% of its 13F portfolio. Sitting at the No. 2 spot is Weiss Asset Management, managed by Andrew Weiss, which holds a $2 million position; 1.5% of its 13F portfolio is allocated to the stock. Other hedge funds and institutional investors with similar optimism consist of Brian Taylor’s Pine River Capital Management and Paul Glazer’s Glazer Capital.

We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: 683 Capital Partners. One hedge fund selling its entire position doesn’t always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don’t think this is the case in this case because none of the 700+ hedge funds tracked by Insider Monkey identified CAMB as a viable investment and initiated a position in the stock.

Let’s also examine hedge fund activity in other stocks similar to Cambridge Capital Acquisition Corp (NASDAQ:CAMB). These stocks are Horizon Technology Finance Corp (NASDAQ:HRZN), Evans Bancorp Inc. (NYSEMKT:EVBN), Unique Fabricating Inc (NYSEMKT:UFAB), and Alliance HealthCare Services, Inc. (NASDAQ:AIQ). This group of stocks’ market valuations are similar to CAMB’s market valuation.

As you can see these stocks had an average of 5 hedge funds with bullish positions and the average amount invested in these stocks was $20 million. That figure was $7 million in CAMB’s case. Horizon Technology Finance Corp (NASDAQ:HRZN) is the most popular stock in this table. On the other hand Evans Bancorp Inc. (NYSEMKT:EVBN) and Unique Fabricating Inc (NYSEMKT:UFAB) are the least popular ones with only 4 bullish hedge fund positions, on par with Cambridge Capital Acquisition Corp (NASDAQ:CAMB). 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 warranted.