It is already common knowledge that individual investors do not usually have the necessary resources and abilities to properly research an investment opportunity. As a result, most investors pick their illusory “winners” by making a superficial analysis and research that leads to poor performance on aggregate. The Standard and Poor’s 500 Index returned 7.6% over the 12-month period ending November 21, while more than 51% of the constituents of the index underperformed the benchmark. Hence, a random stock picking process will most likely lead to disappointment. At the same time, the 30 most favored mid-cap stocks by the best performing hedge funds monitored by Insider Monkey generated a return of 18% over the same time span. Of course, hedge funds do make wrong bets on some occasions and these get disproportionately publicized on financial media, but piggybacking their moves can beat the broader market on average. That’s why we are going to go over recent hedge fund activity in YuMe Inc (NYSE:YUME).
YuMe Inc (NYSE:YUME) shareholders have witnessed a decrease in enthusiasm from smart money in recent months. There were 11 hedge funds in our database with YUME holdings at the end of the second quarter, 2 more than at the end of the third quarter. At the end of this article we will also compare YUME to other stocks including Pure Cycle Corporation (NASDAQ:PCYO), Points International Ltd (USA) (NASDAQ:PCOM), and Ampco-Pittsburgh Corp. (NYSE:AP) to get a better sense of its popularity.
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We care about hedge fund sentiment because historically hedge funds’ stock picks delivered strong risk adjusted returns. There are certain segments of the market where hedge funds’ stock picks performed much better than its benchmarks. For instance, the 30 most popular mid-cap stocks among the best performing hedge funds returned 18% over the last 12 months outpacing S&P 500 Index by more than 10 percentage points. We developed this strategy 2.5 years ago and started sharing its picks in our quarterly newsletter. It bested the S&P 500 Index ETFs by delivering a solid 39% vs. 22% gain for its benchmarks.
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Hedge fund activity in YuMe Inc (NYSE:YUME)
Heading into the fourth quarter of 2016, a total of 9 of the hedge funds tracked by Insider Monkey held long positions in this stock, an 18% drop from the second quarter of 2016. The graph below displays the number of hedge funds with bullish positions in YUME over the last 5 quarters, which had steadily risen until the most recent quarter. So, let’s examine 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, Cannell Capital, led by J. Carlo Cannell, holds the number one position in YuMe Inc (NYSE:YUME). Cannell Capital has a $5.7 million position in the stock, comprising 2.3% of its 13F portfolio. Coming in second is Chuck Royce of Royce & Associates, with a $2.7 million position. Other hedge funds and institutional investors with similar optimism encompass Renaissance Technologies, one of the largest hedge funds in the world, Jack Ripsteen’s Potrero Capital Research, and Charles Frumberg’s Emancipation Capital. We should note that Potrero Capital Research is among our list of the 100 best performing hedge funds, which is based on the performance of their 13F long positions in non-micro-cap stocks.
We already know that not all hedge funds are bullish on the stock and some hedge funds actually sold off their positions entirely. Interestingly, David E. Shaw’s D E Shaw sold off the biggest investment of the “upper crust” of funds tracked by Insider Monkey, valued at close to $0.4 million in stock, and Gavin Saitowitz and Cisco J. del Valle’s Springbok Capital was right behind this move, as the fund sold off a small position.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as YuMe Inc (NYSE:YUME) but similarly valued. We will take a look at Pure Cycle Corporation (NASDAQ:PCYO), Points International Ltd (USA) (NASDAQ:PCOM), Ampco-Pittsburgh Corp. (NYSE:AP), and TrovaGene Inc (NASDAQ:TROV). This group of stocks’ market caps match YUME’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| PCYO | 6 | 54636 | 1 |
| PCOM | 5 | 17456 | -1 |
| AP | 4 | 24192 | -1 |
| TROV | 4 | 15808 | -1 |
As you can see these stocks had an average of 5 hedge funds with bullish positions and the average amount invested in these stocks was $28 million. That figure was $14 million in YUME’s case. Pure Cycle Corporation (NASDAQ:PCYO) is the most popular stock in this table. On the other hand Ampco-Pittsburgh Corp. (NYSE:AP) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks YuMe Inc (NYSE:YUME) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.
Disclosure: None
