At Insider Monkey we track the activity of some of the best-performing hedge funds like Appaloosa Management, Baupost, and Tiger Global because we determined that some of the stocks that they are collectively bullish on can help us generate returns above the broader indices. Out of thousands of stocks that hedge funds invest in, small-caps can provide the best returns over the long term due to the fact that these companies are less efficiently priced and are usually under the radars of mass-media, analysts and dumb money. This is why we follow the smart money moves in the small-cap space.
ANGI Homeservices Inc. (NASDAQ:ANGI) has seen a decrease in support from the world’s most elite money managers in recent months. Our calculations also showed that ANGI isn’t among the 30 most popular stocks among hedge funds (view the video below).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 market by 40 percentage points since May 2014 through May 30, 2019 (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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.
Unlike some fund managers who are betting on Dow reaching 40000 in a year, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We’re going to take a look at the key hedge fund action encompassing ANGI Homeservices Inc. (NASDAQ:ANGI).
What have hedge funds been doing with ANGI Homeservices Inc. (NASDAQ:ANGI)?
Heading into the third quarter of 2019, a total of 20 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -9% from one quarter earlier. By comparison, 13 hedge funds held shares or bullish call options in ANGI a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, SQN Investors was the largest shareholder of ANGI Homeservices Inc. (NASDAQ:ANGI), with a stake worth $83.7 million reported as of the end of March. Trailing SQN Investors was Renaissance Technologies, which amassed a stake valued at $30.4 million. Echo Street Capital Management, Marshall Wace LLP, and Two Sigma Advisors were also very fond of the stock, giving the stock large weights in their portfolios.
Due to the fact that ANGI Homeservices Inc. (NASDAQ:ANGI) has experienced a decline in interest from the smart money, we can see that there lies a certain “tier” of fund managers that slashed their full holdings heading into Q3. Interestingly, Christian Leone’s Luxor Capital Group cut the largest stake of the “upper crust” of funds watched by Insider Monkey, comprising close to $202.8 million in stock, and Eduardo Costa’s Calixto Global Investors was right behind this move, as the fund cut about $18.1 million worth. These transactions are important to note, as aggregate hedge fund interest was cut by 2 funds heading into Q3.
Let’s also examine hedge fund activity in other stocks similar to ANGI Homeservices Inc. (NASDAQ:ANGI). These stocks are GCI Liberty, Inc. (NASDAQ:GLIBA), Tripadvisor Inc (NASDAQ:TRIP), Ciena Corporation (NYSE:CIEN), and Americold Realty Trust (NYSE:COLD). This group of stocks’ market valuations match ANGI’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| GLIBA | 38 | 2029549 | 2 |
| TRIP | 26 | 1216550 | -1 |
| CIEN | 36 | 555109 | 6 |
| COLD | 30 | 908975 | 3 |
| Average | 32.5 | 1177546 | 2.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 32.5 hedge funds with bullish positions and the average amount invested in these stocks was $1178 million. That figure was $206 million in ANGI’s case. GCI Liberty, Inc. (NASDAQ:GLIBA) is the most popular stock in this table. On the other hand Tripadvisor Inc (NASDAQ:TRIP) is the least popular one with only 26 bullish hedge fund positions. Compared to these stocks ANGI Homeservices Inc. (NASDAQ:ANGI) is even less popular than TRIP. Hedge funds dodged a bullet by taking a bearish stance towards ANGI. Our calculations showed that the top 20 most popular hedge fund stocks returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately ANGI wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); ANGI investors were disappointed as the stock returned -45.5% during the third quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far in 2019.
Disclosure: None. This article was originally published at Insider Monkey.
