Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips or bumps on the charts, usually don’t make them change their opinion towards a company. This time it may be different. During the fourth quarter of 2018 we observed increased volatility and a 20% drop in stock prices. Things completely reversed in 2019 and stock indices hit record highs. Recent hedge fund investor letters indicated that they are cutting their overall exposure, closing out some position and doubling down on others. Let’s take a look at the hedge fund sentiment towards Telaria, Inc. (NYSE:TLRA) to find out whether it was one of their high conviction long-term ideas.
Is Telaria, Inc. (NYSE:TLRA) ready to rally soon? The smart money is becoming hopeful. The number of bullish hedge fund positions advanced by 3 recently. Our calculations also showed that TLRA isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
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 Russell 2000 ETFs by 40 percentage points since May 2014 (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 stocks that are in our short portfolio.
Richard Driehaus of Driehaus Capital
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds‘ buy/sell signals. We’re going to go over the new hedge fund action surrounding Telaria, Inc. (NYSE:TLRA).
What does smart money think about Telaria, Inc. (NYSE:TLRA)?
At the end of the third quarter, a total of 17 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 21% from the second quarter of 2019. By comparison, 7 hedge funds held shares or bullish call options in TLRA a year ago. So, let’s find out 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, Richard Driehaus’s Driehaus Capital has the largest position in Telaria, Inc. (NYSE:TLRA), worth close to $12.2 million, accounting for 0.4% of its total 13F portfolio. On Driehaus Capital’s heels is Royce & Associates, managed by Chuck Royce, which holds a $11.3 million position; 0.1% of its 13F portfolio is allocated to the company. Other members of the smart money with similar optimism include Israel Englander’s Millennium Management, Ken Griffin’s Citadel Investment Group and Mark Broach’s Manatuck Hill Partners. In terms of the portfolio weights assigned to each position Manatuck Hill Partners allocated the biggest weight to Telaria, Inc. (NYSE:TLRA), around 1.79% of its 13F portfolio. G2 Investment Partners Management is also relatively very bullish on the stock, dishing out 0.56 percent of its 13F equity portfolio to TLRA.
Consequently, key hedge funds have been driving this bullishness. Osterweis Capital Management, managed by John Osterweis, created the biggest position in Telaria, Inc. (NYSE:TLRA). Osterweis Capital Management had $1.7 million invested in the company at the end of the quarter. John Overdeck and David Siegel’s Two Sigma Advisors also made a $1.4 million investment in the stock during the quarter. The following funds were also among the new TLRA investors: Donald Sussman’s Paloma Partners, David Harding’s Winton Capital Management, and Michael Gelband’s ExodusPoint Capital.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Telaria, Inc. (NYSE:TLRA) but similarly valued. These stocks are Noble Corporation (NYSE:NE), Protagonist Therapeutics, Inc. (NASDAQ:PTGX), BioCryst Pharmaceuticals, Inc. (NASDAQ:BCRX), and Corbus Pharmaceuticals Holdings Inc (NASDAQ:CRBP). This group of stocks’ market values are closest to TLRA’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| NE | 13 | 48356 | -3 |
| PTGX | 15 | 105807 | 1 |
| BCRX | 16 | 102956 | 2 |
| CRBP | 7 | 30293 | -1 |
| Average | 12.75 | 71853 | -0.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 12.75 hedge funds with bullish positions and the average amount invested in these stocks was $72 million. That figure was $47 million in TLRA’s case. BioCryst Pharmaceuticals, Inc. (NASDAQ:BCRX) is the most popular stock in this table. On the other hand Corbus Pharmaceuticals Holdings Inc (NASDAQ:CRBP) is the least popular one with only 7 bullish hedge fund positions. Compared to these stocks Telaria, Inc. (NYSE:TLRA) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Hedge funds were also right about betting on TLRA as the stock returned 20.7% during the first two months of Q4 and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
Disclosure: None. This article was originally published at Insider Monkey.
