Legendary investors such as Leon Cooperman and Seth Klarman earn enormous amounts of money for themselves and their investors by doing in-depth research on small-cap stocks that big brokerage houses don’t publish. Small cap stocks -especially when they are screened well- can generate substantial outperformance versus a boring index fund. That’s why we analyze the activity of those elite funds in these small-cap stocks. In the following paragraphs, we analyze hhgregg, Inc. (NYSE:HGG) from the perspective of those elite funds.
Hedge fund interest in hhgregg, Inc. (NYSE:HGG) shares was flat at the end of last quarter. This is usually a negative indicator. At the end of this article, we will also compare hhgregg, Inc. (NYSE:HGG) to other stocks, including Sharps Compliance Corp. (NASDAQ:SMED), Adaptimmune Therapeutics PLC – ADR (NASDAQ:ADAP), and SL Industries, Inc. (NYSEMKT:SLI) to get a better sense of its popularity.
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In the eyes of most traders, hedge funds are assumed to be slow, old financial vehicles of the past. While there are greater than 8000 funds with their doors open at present, Our experts look at the moguls of this group, approximately 700 funds. It is estimated that this group of investors watches over bulk of all hedge funds’ total asset base, and by shadowing their unrivaled stock picks, Insider Monkey has determined a number of investment strategies that have historically defeated the broader indices. Insider Monkey’s small-cap hedge fund strategy outpaced the S&P 500 index by 12 percentage points annually for a decade in their back tests.
With all of this in mind, let’s review the new action surrounding hhgregg, Inc. (NYSE:HGG).
How are hedge funds trading hhgregg, Inc. (NYSE:HGG)?
Heading into Q4, a total of 8 of the hedge funds tracked by Insider Monkey held long positions in this stock, unchanged from one quarter earlier. With hedge funds’ sentiment swirling, there exists a select group of notable hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Phill Gross and Robert Atchinson’s Adage Capital Management has the number one position in hhgregg, Inc. (NYSE:HGG), worth close to $6.7 million, comprising less than 0.1% of its total 13F portfolio. The second largest stake is held by Renaissance Technologies, holding a $2.4 million position; less than 0.1% of its 13F portfolio is allocated to the stock. Remaining peers with similar optimism include D E Shaw, Peter Muller’s PDT Partners, and Israel Englander’s Millennium Management.
Because hhgregg, Inc. (NYSE:HGG) has faced a declination in interest from the smart money, it’s easy to see that there was a specific group of hedgies who were dropping their full holdings heading into Q4. At the top of the heap, Cliff Asness’ AQR Capital Management cut the biggest position of the 700 funds monitored by Insider Monkey, comprising close to $0.5 million in stock. Youlia Miteva’s fund, Proxima Capital Management, also sold off its stock, about $0.1 million worth of shares. These moves are intriguing to say the least, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as hhgregg, Inc. (NYSE:HGG) but similarly valued. These stocks are Sharps Compliance Corp. (NASDAQ:SMED), Adaptimmune Therapeutics PLC – ADR (NASDAQ:ADAP), SL Industries, Inc. (NYSEMKT:SLI), and Violin Memory Inc (NYSE:VMEM). This group of stocks’ market valuations resembles hhgregg, Inc. (NYSE:HGG)’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SMED | 5 | 3923 | 1 |
| ADAP | 12 | 45571 | -4 |
| SLI | 6 | 47332 | 0 |
| VMEM | 7 | 8724 | -4 |
As you can see, these stocks had an average of 8 hedge funds with bullish positions and the average amount invested in these stocks was $26 million. That figure was $12 million in hhgregg, Inc. (NYSE:HGG)’s case. Adaptimmune Therapeutics PLC – ADR (NASDAQ:ADAP) is the most popular stock in this table. On the other hand, Sharps Compliance Corp. (NASDAQ:SMED) is the least popular one with only 5 bullish hedge fund positions. hhgregg, Inc. (NYSE:HGG) 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, Adaptimmune Therapeutics PLC – ADR (NASDAQ:ADAP) might be a better candidate to consider a long position.
