Hedge Funds Aren’t Crazy About Arctic Cat Inc (ACAT) Anymore

Hedge funds and other investment firms that we track manage billions of dollars of their wealthy clients’ money, and needless to say, they are painstakingly thorough when analyzing where to invest this money, as their own wealth depends on it. Regardless of the various methods used by elite investors like David Tepper and Dan Loeb, the resources they expend are second-to-none. This is especially valuable when it comes to small-cap stocks, which is where they generate their strongest outperformance, as their resources give them a huge edge when it comes to studying these stocks compared to the average investor, which is why we intently follow their activity in the small-cap space.

Is Arctic Cat Inc (NASDAQ:ACAT) a good investment now? The stock has lost nearly half of its value since the beginning of the year, prompting some investors to reduce their bets on the stock. In this way, the number of bullish hedge fund bets fell by 2 lately. ACAT was in 7 hedge funds’ portfolios at the end of September. At the end of this article we will also compare ACAT to other stocks, including Pace Holdings Corp (NASDAQ:PACE), Bank of Marin Bancorp (NASDAQ:BMRC), and The Bancorp, Inc. (NASDAQ:TBBK) to get a better sense of its popularity.

According to most market participants, hedge funds are viewed as worthless, outdated financial tools of yesteryear. While there are over 8000 funds in operation at present, Our researchers look at the bigwigs of this group, approximately 700 funds. It is estimated that this group of investors shepherd bulk of all hedge funds’ total capital, and by tailing their inimitable equity investments, Insider Monkey has determined numerous investment strategies that have historically outrun Mr. Market. Insider Monkey’s small-cap hedge fund strategy outrun the S&P 500 index by 12 percentage points a year for a decade in their back tests.

With all of this in mind, we’re going to take a peek at the recent action regarding Arctic Cat Inc (NASDAQ:ACAT).

Hedge fund activity in Arctic Cat Inc (NASDAQ:ACAT)

At the end of the third quarter, a total of 7 of the hedge funds tracked by Insider Monkey were bullish on this stock, a drop of 22% from the second quarter. With hedge funds’ capital changing hands, there exists a few key hedge fund managers who were boosting their holdings significantly (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Lee Munder Capital Group, managed by Lee Munder, holds the most valuable position in Arctic Cat Inc (NASDAQ:ACAT). Lee Munder Capital Group has a $7.9 million position in the stock, comprising 0.2% of its 13F portfolio. Sitting at the No. 2 spot is Scopus Asset Management, led by Alexander Mitchell, holding a $5 million position; 0.1% of its 13F portfolio is allocated to the stock. Some other hedge funds and institutional investors with similar optimism encompass Chuck Royce’s Royce & Associates, Jim Simons’ Renaissance Technologies, and Adam Wright and Gary Kohler’s Blue Clay Capital.

Because Arctic Cat Inc (NASDAQ:ACAT) has faced a declining sentiment from the entirety of the hedge funds we track, logic holds that there was a specific group of hedge funds who were dropping their entire stakes in the third quarter. At the top of the heap, Ira Unschuld’s Brant Point Investment Management sold off the biggest stake of the “upper crust” of funds monitored by Insider Monkey, comprising an estimated $2.5 million in stock.

Let’s also examine hedge fund activity in other stocks similar to Arctic Cat Inc (NASDAQ:ACAT). We will take a look at Pace Holdings Corp (NASDAQ:PACE), Bank of Marin Bancorp (NASDAQ:BMRC), The Bancorp, Inc. (NASDAQ:TBBK), and NQ Mobile Inc (ADR) (NYSE:NQ). This group of stocks’ market values match ACAT’s market value.

As you can see these stocks had an average of 10 hedge funds with bullish positions and the average amount invested in these stocks was $60 million, compared to $19 million in ACAT’s case. Pace Holdings Corp (NASDAQ:PACE) is the most popular stock in this table. On the other hand Bank of Marin Bancorp (NASDAQ:BMRC) is the least popular one with only 4 bullish hedge fund positions. Arctic Cat Inc (NASDAQ:ACAT) is not the least popular stock in this group, but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard PACE might be a better candidate to consider a long position.