Here is What Hedge Funds Think About Trupanion Inc (TRUP)

The third quarter was a rough one for most investors, as fears of an interest rate hike in the U.S, a weakening economy in China, and a stagnant Europe, weighed heavily on the minds of investors. Both the S&P 500 and Russell 2000 sank as a result, with the Russell 2000, which is composed of smaller companies, being hit especially hard. This was primarily due to hedge funds, which are big supporters of small-cap stocks, pulling some of their capital out of the volatile markets during this time. Let’s look at how this market volatility affected the sentiment of hedge funds towards Trupanion Inc (NYSE:TRUP), and what that likely means for the prospects of the company and its stock.

Is Trupanion Inc (NYSE:TRUP) worth your attention right now? Investors who are in the know are taking a bearish view. The number of bullish hedge fund positions retreated by 3 recently. At the end of this article we will also compare TRUP to other stocks, including Gladstone Investment Corporation (NASDAQ:GAIN), Second Sight Medical Products Inc (NASDAQ:EYES), and SeaChange International (NASDAQ:SEAC) to get a better sense of its popularity.

In the eyes of most stock holders, hedge funds are assumed to be worthless, old investment vehicles of years past. While there are more than 8000 funds in operation today, Our researchers choose to focus on the bigwigs of this club, approximately 700 funds. These investment experts shepherd bulk of the hedge fund industry’s total capital, and by following their first-class picks, Insider Monkey has unearthed a number of investment strategies that have historically defeated Mr. Market. Insider Monkey’s small-cap hedge fund strategy exceeded the S&P 500 index by 12 percentage points per year for a decade in their back tests.

Now, we’re going to take a gander at the fresh action regarding Trupanion Inc (NYSE:TRUP).

How have hedgies been trading Trupanion Inc (NYSE:TRUP)?

Heading into Q4, a total of 5 of the hedge funds tracked by Insider Monkey held long positions in this stock, a slump of 38% from the previous quarter. With hedgies’ sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).

According to Insider Monkey’s hedge fund database, Deerfield Management, managed by James E. Flynn, holds the number one position in Trupanion Inc (NYSE:TRUP). According to its latest quarterly report, the fund has a $11.9 million position in the stock, comprising 0.5% of its 13F portfolio. On Deerfield Management’s heels is Ken Griffin of Citadel Investment Group, with a $2.5 million stake; less than 0.1% of its 13F portfolio is allocated to the stock. Remaining peers that are bullish contain Jacob Gottlieb’s Visium Asset Management, Mark N. Diker’s Diker Management and Jim Simons’s Renaissance Technologies.

Judging by the fact that Trupanion Inc (NYSE:TRUP) has experienced a declination in interest from hedge fund managers, it’s easy to see that there is a sect of hedgies who sold off their positions entirely last quarter. Intriguingly, Frank Slattery’s Symmetry Peak Management cut the biggest investment of the “upper crust” of funds tracked by Insider Monkey, valued at about $1.7 million in stock, and Hal Mintz’s Sabby Capital was right behind this move, as the fund dumped about $1.3 million worth of shares. These transactions are interesting, as total hedge fund interest was cut by 3 funds last quarter.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Trupanion Inc (NYSE:TRUP) but similarly valued. We will take a look at Gladstone Investment Corporation (NASDAQ:GAIN), Second Sight Medical Products Inc (NASDAQ:EYES), SeaChange International (NASDAQ:SEAC), and FreightCar America, Inc. (NASDAQ:RAIL). All of these stocks’ market caps are similar to TRUP’s market cap.

As you can see these stocks had an average of 9 hedge funds with bullish positions and the average amount invested in these stocks was $17 million. FreightCar America, Inc. (NASDAQ:RAIL) is the most popular stock in this table. On the other hand Second Sight Medical Products Inc (NASDAQ:EYES) is the least popular one with only 4 bullish hedge fund positions. Trupanion Inc (NYSE:TRUP) is not the least popular stock in this group, but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard RAIL might be a better candidate to consider a long position.