Hedge Funds Are Dumping Nanometrics Incorporated (NANO)

Hedge funds and other investment firms run by legendary investors like Israel Englander and Ray Dalio are entrusted to manage billions of dollars of accredited investors’ money because they are without peer in the resources they use to identify the best investments for their chosen investment horizon. Moreover, they are more willing to invest a greater amount of their resources in small-cap stocks than big brokerage houses, and this is often where they generate their outperformance, which is why we pay particular attention to their best ideas in this space.

Is Nanometrics Incorporated (NASDAQ:NANO) undervalued? Investors who are in the know are reducing their bets on the stock. The number of bullish hedge fund bets suffered a reduction of 1 lately. NANO was in 15 hedge funds’ portfolios at the end of September. There were 16 hedge funds in our database with NANO holdings at the end of the previous quarter. 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 Global Blood Therapeutics Inc (NASDAQ:GBT), SP Plus Corp (NASDAQ:SP), and Motorcar Parts of America, Inc. (NASDAQ:MPAA) to gather more data points.

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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Hedge fund activity in Nanometrics Incorporated (NASDAQ:NANO)

Heading into the fourth quarter of 2016, a total of 15 of the hedge funds tracked by Insider Monkey held long positions in this stock, a decrease of 6% from the previous quarter. On the other hand, there were a total of 8 hedge funds with a bullish position in NANO at the beginning of this year. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

When looking at the institutional investors followed by Insider Monkey, Royce & Associates, led by Chuck Royce, holds the most valuable position in Nanometrics Incorporated (NASDAQ:NANO). Royce & Associates has a $45.3 million position in the stock. The second most bullish fund manager is Jim Simons of Renaissance Technologies, with a $11.2 million position. Other peers with similar optimism encompass Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, J. Daniel Plants’s Voce Capital and Cliff Asness’ AQR Capital Management. 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.

Since Nanometrics Incorporated (NASDAQ:NANO) has encountered falling interest from the smart money, it’s safe to say that there exists a select few money managers that decided to sell off their entire stakes in the third quarter. Intriguingly, Michael Murphy and Daniel Donoghue’s Discovery Group cashed in the largest stake of the “upper crust” of funds monitored by Insider Monkey, comprising an estimated $14.1 million in stock, and Christopher Zepf and Brian Thonn’s Kingdom Ridge Capital was right behind this move, as the fund dumped about $2.4 million worth of shares.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Nanometrics Incorporated (NASDAQ:NANO) but similarly valued. These stocks are Global Blood Therapeutics Inc (NASDAQ:GBT), SP Plus Corp (NASDAQ:SP), Motorcar Parts of America, Inc. (NASDAQ:MPAA), and Radware Ltd. (NASDAQ:RDWR). This group of stocks’ market caps match NANO’s market cap.

As you can see these stocks had an average of 12 hedge funds with bullish positions and the average amount invested in these stocks was $101 million. That figure was $75 million in NANO’s case. Global Blood Therapeutics Inc (NASDAQ:GBT) is the most popular stock in this table. On the other hand SP Plus Corp (NASDAQ:SP) is the least popular one with only 10 bullish hedge fund positions. Nanometrics Incorporated (NASDAQ:NANO) 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 GBT might be a better candidate to consider taking a long position in.

Disclosure: None