After several tireless days we have finished crunching the numbers from nearly 750 13F filings issued by the elite hedge funds and other investment firms that we track at Insider Monkey, which disclosed those firms’ equity portfolios as of June 28. The results of that effort will be put on display in this article, as we share valuable insight into the smart money sentiment towards Castlight Health Inc (NYSE:CSLT).
Is Castlight Health Inc (NYSE:CSLT) ready to rally soon? The smart money is turning bullish. The number of long hedge fund positions went up by 4 recently. Our calculations also showed that CSLT isn’t among the 30 most popular stocks among hedge funds (see the video below). CSLT was in 16 hedge funds’ portfolios at the end of June. There were 12 hedge funds in our database with CSLT positions at the end of the previous quarter.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 market by 40 percentage points since May 2014 through May 30, 2019 (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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.
Unlike other investors who track every movement of the 25 largest hedge funds, our long-short investment strategy relies on hedge fund buy/sell signals given by the 100 best performing hedge funds. We’re going to go over the recent hedge fund action surrounding Castlight Health Inc (NYSE:CSLT).
How are hedge funds trading Castlight Health Inc (NYSE:CSLT)?
Heading into the third quarter of 2019, a total of 16 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 33% from the previous quarter. The graph below displays the number of hedge funds with bullish position in CSLT over the last 16 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Royce & Associates was the largest shareholder of Castlight Health Inc (NYSE:CSLT), with a stake worth $6.2 million reported as of the end of March. Trailing Royce & Associates was Maverick Capital, which amassed a stake valued at $5.9 million. Renaissance Technologies, D E Shaw, and GMT Capital were also very fond of the stock, giving the stock large weights in their portfolios.
As aggregate interest increased, key hedge funds have jumped into Castlight Health Inc (NYSE:CSLT) headfirst. Cannell Capital, managed by J. Carlo Cannell, established the largest position in Castlight Health Inc (NYSE:CSLT). Cannell Capital had $0.9 million invested in the company at the end of the quarter. Joseph Mathias’s Concourse Capital Management also initiated a $0.2 million position during the quarter. The other funds with new positions in the stock are John Overdeck and David Siegel’s Two Sigma Advisors, Peter Algert and Kevin Coldiron’s Algert Coldiron Investors, and Gavin Saitowitz and Cisco J. del Valle’s Springbok Capital.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Castlight Health Inc (NYSE:CSLT) but similarly valued. These stocks are REX American Resources Corp (NYSE:REX), Sierra Wireless, Inc. (NASDAQ:SWIR), Diplomat Pharmacy Inc (NYSE:DPLO), and PDF Solutions, Inc. (NASDAQ:PDFS). All of these stocks’ market caps are similar to CSLT’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| REX | 8 | 40085 | 2 |
| SWIR | 10 | 66704 | -2 |
| DPLO | 8 | 70605 | -6 |
| PDFS | 8 | 25148 | -1 |
| Average | 8.5 | 50636 | -1.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 8.5 hedge funds with bullish positions and the average amount invested in these stocks was $51 million. That figure was $28 million in CSLT’s case. Sierra Wireless, Inc. (NASDAQ:SWIR) is the most popular stock in this table. On the other hand REX American Resources Corp (NYSE:REX) is the least popular one with only 8 bullish hedge fund positions. Compared to these stocks Castlight Health Inc (NYSE:CSLT) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately CSLT wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on CSLT were disappointed as the stock returned -56.3% during the third quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market in Q3.
Disclosure: None. This article was originally published at Insider Monkey.
