You probably know from experience that there is not as much information on small-cap companies as there is on large companies. Of course, this makes it really hard and difficult for individual investors to make proper and accurate analysis of certain small-cap companies. However, well-known and successful hedge fund investors like Carl Icahn and George Soros hold the necessary resources and abilities to conduct an extensive stock analysis on small-cap stocks, which enable them to make millions of dollars by identifying potential winners within the small-cap galaxy of stocks. This represents the main reason why Insider Monkey takes notice of the hedge fund activity in these overlooked stocks.
Hedge fund interest in B. Riley Financial Inc (NASDAQ:RILY) shares was flat at the end of last quarter. This is usually a negative indicator. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Handy and Harman Ltd (NASDAQ:HNH), Inotek Pharmaceuticals Corp (NASDAQ:ITEK), and Amber Road Inc (NYSE:AMBR) to gather more data points.
Follow B. Riley Financial Inc. (NASDAQ:RILY)
Follow B. Riley Financial Inc. (NASDAQ:RILY)
At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.
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With all of this in mind, we’re going to take a look at the latest action surrounding B. Riley Financial Inc (NASDAQ:RILY).
How have hedgies been trading B. Riley Financial Inc (NASDAQ:RILY)?
At the end of the third quarter, a total of 6 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the second quarter of 2016. Below, you can check out the change in hedge fund sentiment towards RILY over the last 5 quarters. With hedgies’ sentiment swirling, there exists a select group of notable hedge fund managers who were upping their stakes considerably (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, Paul Singer’s Elliott Management has the largest position in B. Riley Financial Inc (NASDAQ:RILY), worth close to $30.8 million, comprising 0.3% of its total 13F portfolio. The second largest stake is held by Brett Hendrickson of Nokomis Capital, with a $17.9 million position; 3.8% of its 13F portfolio is allocated to the company. Other peers with similar optimism encompass John Fichthorn’s Dialectic Capital Management, Mark Broach’s Manatuck Hill Partners and J. Carlo Cannell’s Cannell Capital. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.
Earlier we told you that the aggregate hedge fund interest in the stock was unchanged and we view this as a negative development. Even though there weren’t any hedge funds dumping their holdings during the third quarter, there weren’t any hedge funds initiating brand new positions. This indicates that hedge funds, at the very best, perceive this stock as dead money and they haven’t identified any viable catalysts that can attract investor attention.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as B. Riley Financial Inc (NASDAQ:RILY) but similarly valued. We will take a look at Handy and Harman Ltd (NASDAQ:HNH), Inotek Pharmaceuticals Corp (NASDAQ:ITEK), Amber Road Inc (NYSE:AMBR), and Agilysys, Inc. (NASDAQ:AGYS). This group of stocks’ market valuations are similar to RILY’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| HNH | 3 | 188746 | -1 |
| ITEK | 16 | 50535 | 4 |
| AMBR | 13 | 40828 | 3 |
| AGYS | 8 | 110578 | -1 |
As you can see these stocks had an average of 10 hedge funds with bullish positions and the average amount invested in these stocks was $98 million. That figure was $64 million in RILY’s case. Inotek Pharmaceuticals Corp (NASDAQ:ITEK) is the most popular stock in this table. On the other hand Handy and Harman Ltd (NASDAQ:HNH) is the least popular one with only 3 bullish hedge fund positions. B. Riley Financial Inc (NASDAQ:RILY) 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 ITEK might be a better candidate to consider taking a long position in.