We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Out of thousands of stocks that are currently traded on the market, it is difficult to identify those that will really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of nearly 835 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has the potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about 8×8, Inc. (NASDAQ:EGHT).
Is 8×8, Inc. (NASDAQ:EGHT) ready to rally soon? Prominent investors are in a bearish mood. The number of long hedge fund bets fell by 11 in recent months. Our calculations also showed that EGHT isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings). EGHT was in 14 hedge funds’ portfolios at the end of December. There were 25 hedge funds in our database with EGHT positions at the end of the previous quarter.
In the financial world there are dozens of tools shareholders have at their disposal to size up stocks. A couple of the most innovative tools are hedge fund and insider trading activity. Our researchers have shown that, historically, those who follow the top picks of the elite fund managers can beat the S&P 500 by a superb margin (see the details here).
Chase Coleman of Tiger Global
We leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like this one. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let’s check out the latest hedge fund action surrounding 8×8, Inc. (NASDAQ:EGHT).
How are hedge funds trading 8×8, Inc. (NYSE:EGHT)?
At Q4’s end, a total of 14 of the hedge funds tracked by Insider Monkey were long this stock, a change of -44% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in EGHT over the last 18 quarters. With hedge funds’ sentiment swirling, there exists a select group of key hedge fund managers who were boosting their stakes considerably (or already accumulated large positions).
More specifically, Sylebra Capital Management was the largest shareholder of 8×8, Inc. (NYSE:EGHT), with a stake worth $93.6 million reported as of the end of September. Trailing Sylebra Capital Management was Tiger Global Management LLC, which amassed a stake valued at $90.6 million. Citadel Investment Group, Polar Capital, and SRS Investment Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position SG Capital Management allocated the biggest weight to 8×8, Inc. (NYSE:EGHT), around 4.28% of its 13F portfolio. Sylebra Capital Management is also relatively very bullish on the stock, setting aside 3.67 percent of its 13F equity portfolio to EGHT.
Seeing as 8×8, Inc. (NYSE:EGHT) has experienced bearish sentiment from the smart money, we can see that there is a sect of money managers that slashed their positions entirely last quarter. Interestingly, Louis Bacon’s Moore Global Investments sold off the biggest position of the “upper crust” of funds tracked by Insider Monkey, comprising an estimated $10.7 million in stock, and George Baxter’s Sabrepoint Capital was right behind this move, as the fund dropped about $4.1 million worth. These bearish behaviors are important to note, as total hedge fund interest was cut by 11 funds last quarter.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as 8×8, Inc. (NYSE:EGHT) but similarly valued. These stocks are Ligand Pharmaceuticals Inc. (NASDAQ:LGND), WestAmerica Bancorp. (NASDAQ:WABC), Heartland Financial USA Inc (NASDAQ:HTLF), and Onto Innovation Inc. (NYSE:ONTO). This group of stocks’ market caps are similar to EGHT’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| LGND | 23 | 380175 | 2 |
| WABC | 11 | 27634 | 0 |
| HTLF | 8 | 14951 | -2 |
| ONTO | 14 | 167125 | -4 |
| Average | 14 | 147471 | -1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 14 hedge funds with bullish positions and the average amount invested in these stocks was $147 million. That figure was $364 million in EGHT’s case. Ligand Pharmaceuticals Inc. (NASDAQ:LGND) is the most popular stock in this table. On the other hand Heartland Financial USA Inc (NASDAQ:HTLF) is the least popular one with only 8 bullish hedge fund positions. 8×8, Inc. (NYSE:EGHT) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 13.0% in 2020 through April 6th but still beat the market by 4.2 percentage points. A small number of hedge funds were also right about betting on EGHT as the stock returned -11.9% during the same time period and outperformed the market by an even larger margin.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
