Hedge Funds Aren’t Crazy About LivePerson, Inc. (LPSN) Anymore

Reputable billionaire investors such as Nelson Peltz and David Tepper generate exorbitant profits for their wealthy accredited investors (a minimum of $1 million in investable assets would be required to invest in a hedge fund and most successful hedge funds won’t accept your savings unless you commit at least $5 million) by pinpointing winning small-cap stocks. There is little or no publicly-available information at all on some of these small companies, which makes it hard for an individual investor to pin down a winner within the small-cap space. However, hedge funds and other big asset managers can do the due diligence and analysis for you instead, thanks to their highly-skilled research teams and vast resources to conduct an appropriate evaluation process. Looking for potential winners within the small-cap galaxy of stocks? We believe following the smart money is a good starting point.

LivePerson, Inc. (NASDAQ:LPSN) shareholders have witnessed a decrease in support from the world’s most successful money managers of late. There were 18 hedge funds in our database with LPSN holdings at the end of the previous quarter. At the end of this article we will also compare LPSN to other stocks including Oriental Financial Group Inc. (NYSE:OFG), On Deck Capital Inc (NYSE:ONDK), and Unisys Corporation (NYSE:UIS) to get a better sense of its popularity.

We follow over 700 hedge funds and other institutional investors and by analyzing their quarterly 13F filings, we identify stocks that they are collectively bullish on and develop investment strategies based on this data. One strategy that outperformed the market over the last year, involves selecting the 100 best-performing funds and identifying the 30 mid-cap stocks that they are collectively most bullish on. Over the past year, this strategy generated returns of 18%, topping the 8% gain registered by S&P 500 ETFs.

Dean Drobot/Shutterstock.com

Now, let’s view the new action encompassing LivePerson, Inc. (NASDAQ:LPSN).

Hedge fund activity in LivePerson, Inc. (NASDAQ:LPSN)

At the end of the third quarter, a total of 14 of the hedge funds tracked by Insider Monkey were long this stock, a decline of 22% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards LPSN over the last 5 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

According to Insider Monkey’s hedge fund database, Robert G. Moses’s RGM Capital has the biggest position in LivePerson, Inc. (NASDAQ:LPSN), worth close to $41.4 million, comprising 4.7% of its total 13F portfolio. The second largest stake is held by Jim Simons’ Renaissance Technologies, which holds a $12.9 million position; the fund has less than 0.1% of its 13F portfolio invested in the stock. Other professional money managers with similar optimism include Michael Doheny’s Freshford Capital Management, D. E. Shaw’s D E Shaw and Charles Frumberg’s Emancipation Capital. We should note that RGM Capital is 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 LivePerson, Inc. (NASDAQ:LPSN) has sustained falling interest from the aggregate hedge fund industry, it’s safe to say that there lies a certain “tier” of money managers that elected to cut their positions entirely in the third quarter. At the top of the heap, Michael Murphy and Daniel Donoghue’s Discovery Group cut the biggest investment of the “upper crust” of funds tracked by Insider Monkey, worth an estimated $1.8 million in stock, and Youlia Miteva’s Proxima Capital Management was right behind this move, as the fund said goodbye to about $1.8 million worth of shares.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as LivePerson, Inc. (NASDAQ:LPSN) but similarly valued. We will take a look at Oriental Financial Group Inc. (NYSE:OFG), On Deck Capital Inc (NYSE:ONDK), Unisys Corporation (NYSE:UIS), and GP Strategies Corporation (NYSE:GPX). This group of stocks’ market valuations resemble LPSN’s market valuation.

As you can see these stocks had an average of 14 hedge funds with bullish positions and the average amount invested in these stocks was $77 million. That figure was $69 million in LPSN’s case. Unisys Corporation (NYSE:UIS) is the most popular stock in this table. On the other hand Oriental Financial Group Inc. (NYSE:OFG) is the least popular one with only 11 bullish hedge fund positions. LivePerson, Inc. (NASDAQ:LPSN) 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 UIS might be a better candidate to consider taking a long position in.

Disclosure: none.