Here is What Hedge Funds Think About QuinStreet Inc (QNST)

A whopping number of 13F filings filed with U.S. Securities and Exchange Commission has been processed by Insider Monkey so that individual investors can look at the overall hedge fund sentiment towards the stocks included in their watchlists. These freshly-submitted public filings disclose money managers’ equity positions as of the end of the three-month period that ended June 30th, so let’s proceed with the discussion of the hedge fund sentiment on QuinStreet Inc (NASDAQ:QNST).

Hedge fund interest in QuinStreet Inc (NASDAQ:QNST) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that QNST isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings). At the end of this article we will also compare QNST to other stocks including Golden Nugget Online Gaming, Inc. (NASDAQ:GNOG), Diversified Healthcare Trust (NASDAQ:DHC), and Scholar Rock Holding Corporation (NASDAQ:SRRK) to get a better sense of its popularity.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. 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 S&P 500 ETFs by 79 percentage points since March 2017 (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.

Andre Perold of HighVista Strategies

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, plant based food market is expected to explode 100-fold by 2050, so we are checking out this under-the radar stock. We go through lists like the 10 best growth stocks to buy to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Keeping this in mind let’s review the new hedge fund action encompassing QuinStreet Inc (NASDAQ:QNST).

Do Hedge Funds Think QNST Is A Good Stock To Buy Now?

At second quarter’s end, a total of 20 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from one quarter earlier. On the other hand, there were a total of 20 hedge funds with a bullish position in QNST a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Of the funds tracked by Insider Monkey, Private Capital Management, managed by Gregg J. Powers, holds the most valuable position in QuinStreet Inc (NASDAQ:QNST). Private Capital Management has a $49.6 million position in the stock, comprising 7.5% of its 13F portfolio. Coming in second is Royce & Associates, led by Chuck Royce, holding a $28.5 million position; the fund has 0.2% of its 13F portfolio invested in the stock. Remaining professional money managers with similar optimism encompass Renaissance Technologies, George McCabe’s Portolan Capital Management and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital. In terms of the portfolio weights assigned to each position Private Capital Management allocated the biggest weight to QuinStreet Inc (NASDAQ:QNST), around 7.46% of its 13F portfolio. Mill Road Capital Management is also relatively very bullish on the stock, earmarking 2.06 percent of its 13F equity portfolio to QNST.

Since QuinStreet Inc (NASDAQ:QNST) has experienced falling interest from the entirety of the hedge funds we track, logic holds that there is a sect of hedge funds that slashed their positions entirely heading into Q3. At the top of the heap, David Rosen’s Rubric Capital Management cut the biggest stake of the “upper crust” of funds watched by Insider Monkey, valued at close to $4.6 million in stock. Mark Coe’s fund, Intrinsic Edge Capital, also dumped its stock, about $3.3 million worth. These moves are intriguing to say the least, as aggregate 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 QuinStreet Inc (NASDAQ:QNST) but similarly valued. We will take a look at Golden Nugget Online Gaming, Inc. (NASDAQ:GNOG), Diversified Healthcare Trust (NASDAQ:DHC), Scholar Rock Holding Corporation (NASDAQ:SRRK), Summit Hotel Properties Inc (NYSE:INN), Keros Therapeutics, Inc. (NASDAQ:KROS), Bain Capital Specialty Finance, Inc. (NYSE:BCSF), and German American Bancorp., Inc. (NASDAQ:GABC). All of these stocks’ market caps resemble QNST’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 10.6 hedge funds with bullish positions and the average amount invested in these stocks was $60 million. That figure was $151 million in QNST’s case. Summit Hotel Properties Inc (NYSE:INN) is the most popular stock in this table. On the other hand Golden Nugget Online Gaming, Inc. (NASDAQ:GNOG) is the least popular one with only 7 bullish hedge fund positions. Compared to these stocks QuinStreet Inc (NASDAQ:QNST) is more popular among hedge funds. Our overall hedge fund sentiment score for QNST is 76.4. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 24% in 2021 through October 22nd and still beat the market by 1.6 percentage points. Unfortunately QNST wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on QNST were disappointed as the stock returned -20.2% since the end of the second quarter (through 10/22) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market since 2019.

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Disclosure: None. This article was originally published at Insider Monkey.