Hedge Funds Are Dumping Capstone Turbine Corporation (CPST)

Billionaire hedge fund managers such as Steve Cohen and Stan Druckenmiller can generate millions or even billions of dollars every year by pinning down high-potential small-cap stocks and pouring cash into these candidates. Small-cap stocks are overlooked by most investors, brokerage houses, and financial services hubs, while the unlimited research abilities of the big players within the hedge fund industry can easily identify the undervalued and high-potential stocks that reside the ignored corners of equity markets. There are numerous small-cap stocks that have turned out to be great winners, which is one of the main reasons the Insider Monkey team pays close attention to the hedge fund activity in relation to these stocks.

Is Capstone Turbine Corporation (NASDAQ:CPST) a buy, sell, or hold? The smart money is becoming less hopeful. The number of long hedge fund bets decreased by 2 lately. CPST was in 7 hedge funds’ portfolios at the end of September. There were 9 hedge funds in our database with CPST positions at the end of the previous quarter. At the end of this article we will also compare CPST to other stocks, including Energy Recovery, Inc. (NASDAQ:ERII), ContraFect Corp (NASDAQ:CFRX), and Advent/Claymore Enhanced Growth & Income (NYSE:LCM) to get a better sense of its popularity.

To most shareholders, hedge funds are seen as slow, outdated investment tools of the past. While there are more than 8000 funds in operation at the moment, Our researchers choose to focus on the aristocrats of this group, around 700 funds. It is estimated that this group of investors watch over bulk of the hedge fund industry’s total capital, and by keeping track of their best equity investments, Insider Monkey has identified several investment strategies that have historically surpassed the market. Insider Monkey’s small-cap hedge fund strategy outperformed the S&P 500 index by 12 percentage points annually for a decade in their back tests.

With all of this in mind, let’s check out the key action encompassing Capstone Turbine Corporation (NASDAQ:CPST).

How have hedgies been trading Capstone Turbine Corporation (NASDAQ:CPST)?

Heading into Q4, a total of 7 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -22% from the second quarter. With the smart money’s sentiment swirling, there exists an “upper tier” of notable hedge fund managers who were upping their stakes meaningfully (or already accumulated large positions).

According to Insider Monkey’s hedge fund database, Thomas E. Claugus’ GMT Capital has the biggest position in Capstone Turbine Corporation (NASDAQ:CPST), worth close to $2.2 million, accounting for 0.1% of its total 13F portfolio. On GMT Capital’s heels is Millennium Management, managed by Israel Englander, which holds a $1 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Remaining professional money managers that are bullish include Chuck Royce’s Royce & Associates, Philip Hempleman’s Ardsley Partners and D. E. Shaw’s D E Shaw.

Seeing as Capstone Turbine Corporation (NASDAQ:CPST) has experienced a bearish sentiment from the entirety of the hedge funds we track, it’s safe to say that there exists a select few money managers that elected to cut their positions entirely last quarter. Intriguingly, Kerr Neilson’s Platinum Asset Management said goodbye to the largest stake of all the hedgies tracked by Insider Monkey, valued at close to $0.4 million in stock. Ben Levine, Andrew Manuel and Stefan Renold’s fund, LMR Partners, also sold off its stock, about $0.2 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest dropped by 2 funds last quarter.

Let’s now review hedge fund activity in other stocks similar to Capstone Turbine Corporation (NASDAQ:CPST). We will take a look at Energy Recovery, Inc. (NASDAQ:ERII), ContraFect Corp (NASDAQ:CFRX), Advent/Claymore Enhanced Growth & Income (NYSE:LCM), and Ellington Residential Mortgage REIT (NYSE:EARN). All of these stocks’ market caps are similar to CPST’s market cap.

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 $5 million. That figure was also $5 million in CPST’s case. ContraFect Corp (NASDAQ:CFRX) is the most popular stock in this table. On the other hand Energy Recovery, Inc. (NASDAQ:ERII) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks Capstone Turbine Corporation (NASDAQ:CPST) 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.