Hedge Funds Are Selling AutoWeb, Inc. (AUTO)

Out of thousands of stocks that are currently traded on the market, it is difficult to identify those that will really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of nearly 900 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has the potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about AutoWeb, Inc. (NASDAQ:AUTO).

Is AutoWeb, Inc. (NASDAQ:AUTO) a bargain? The smart money was becoming less hopeful. The number of long hedge fund bets retreated by 1 in recent months. AutoWeb, Inc. (NASDAQ:AUTO) was in 3 hedge funds’ portfolios at the end of the first quarter of 2021. The all time high for this statistic is 11. Our calculations also showed that AUTO isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings). There were 4 hedge funds in our database with AUTO holdings at the end of December.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 115 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.

Israel Englander of Millennium Management

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, an activist hedge fund wants to buy this $26 biotech stock for $50. So, we recommended a long position to our monthly premium newsletter subscribers. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Keeping this in mind we’re going to review the fresh hedge fund action regarding AutoWeb, Inc. (NASDAQ:AUTO).

Do Hedge Funds Think AUTO Is A Good Stock To Buy Now?

At the end of the first quarter, a total of 3 of the hedge funds tracked by Insider Monkey were long this stock, a change of -25% from the previous quarter. The graph below displays the number of hedge funds with bullish position in AUTO over the last 23 quarters. With the smart money’s sentiment swirling, there exists an “upper tier” of notable hedge fund managers who were upping their holdings substantially (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Renaissance Technologies has the biggest position in AutoWeb, Inc. (NASDAQ:AUTO), worth close to $1.6 million, amounting to less than 0.1%% of its total 13F portfolio. The second largest stake is held by Citadel Investment Group, managed by Ken Griffin, which holds a $0.1 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. In terms of the portfolio weights assigned to each position Renaissance Technologies allocated the biggest weight to AutoWeb, Inc. (NASDAQ:AUTO), around 0.0019% of its 13F portfolio. Millennium Management is also relatively very bullish on the stock, dishing out 0 percent of its 13F equity portfolio to AUTO.

We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Algert Global. 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 750+ hedge funds tracked by Insider Monkey identified AUTO as a viable investment and initiated a position in the stock.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as AutoWeb, Inc. (NASDAQ:AUTO) but similarly valued. We will take a look at Auddia Inc. (NASDAQ:AUUD), Invivo Therapeutics Holdings Corp (NASDAQ:NVIV), Cemtrex Inc. (NASDAQ:CETX), HTG Molecular Diagnostics, Inc. (NASDAQ:HTGM), Psychemedics Corp. (NASDAQ:PMD), Summit Wireless Technologies, Inc. (NASDAQ:WISA), and Kewaunee Scientific Corporation (NASDAQ:KEQU). This group of stocks’ market values are closest to AUTO’s market value.

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As you can see these stocks had an average of 3.1 hedge funds with bullish positions and the average amount invested in these stocks was $2 million. That figure was $2 million in AUTO’s case. HTG Molecular Diagnostics, Inc. (NASDAQ:HTGM) is the most popular stock in this table. On the other hand Auddia Inc. (NASDAQ:AUUD) is the least popular one with only 2 bullish hedge fund positions. AutoWeb, Inc. (NASDAQ:AUTO) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for AUTO is 28.8. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 17.2% in 2021 through June 11th and beat the market by 3.3 percentage points. A small number of hedge funds were also right about betting on AUTO, though not to the same extent, as the stock returned 7.1% since the end of Q1 (through June 11th) and outperformed the market.

Disclosure: None. This article was originally published at Insider Monkey.