Reputable billionaire investors such as Jim Simons, Cliff Asness and David Tepper generate exorbitant profits for their wealthy accredited investors (a minimum of $1 million in investable assets would be required to invest in a hedge fund and most successful hedge funds won’t accept your savings unless you commit at least $5 million) by pinpointing winning small-cap stocks. There is little or no publicly-available information at all on some of these small companies, which makes it hard for an individual investor to pin down a winner within the small-cap space. However, hedge funds and other big asset managers can do the due diligence and analysis for you instead, thanks to their highly-skilled research teams and vast resources to conduct an appropriate evaluation process. Looking for potential winners within the small-cap galaxy of stocks? We believe following the smart money is a good starting point.
Hedge fund interest in CalAmp Corp. (NASDAQ:CAMP) shares was flat at the end of last quarter. This is usually a negative indicator. At the end of this article we will also compare CAMP to other stocks including Container Store Group Inc (NYSE:TCS), Landmark Infrastructure Partners LP (NASDAQ:LMRK), and Rigel Pharmaceuticals, Inc. (NASDAQ:RIGL) to get a better sense of its popularity.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. 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.
We’re going to go over the new hedge fund action regarding CalAmp Corp. (NASDAQ:CAMP).
What does smart money think about CalAmp Corp. (NASDAQ:CAMP)?
At the end of the first quarter, a total of 15 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the previous quarter. The graph below displays the number of hedge funds with bullish position in CAMP over the last 15 quarters. 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, Lynrock Lake was the largest shareholder of CalAmp Corp. (NASDAQ:CAMP), with a stake worth $59.3 million reported as of the end of March. Trailing Lynrock Lake was Renaissance Technologies, which amassed a stake valued at $12.1 million. Millennium Management, Two Sigma Advisors, and Vertex One Asset Management were also very fond of the stock, giving the stock large weights in their portfolios.
Seeing as CalAmp Corp. (NASDAQ:CAMP) has faced declining sentiment from hedge fund managers, logic holds that there was a specific group of hedgies who were dropping their entire stakes heading into Q3. Interestingly, Minhua Zhang’s Weld Capital Management dropped the biggest position of the 700 funds tracked by Insider Monkey, totaling an estimated $0.6 million in call options, and Ken Griffin’s Citadel Investment Group was right behind this move, as the fund dumped about $0.2 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as CalAmp Corp. (NASDAQ:CAMP) but similarly valued. These stocks are Container Store Group Inc (NYSE:TCS), Landmark Infrastructure Partners LP (NASDAQ:LMRK), Rigel Pharmaceuticals, Inc. (NASDAQ:RIGL), and Anika Therapeutics, Inc. (NASDAQ:ANIK). This group of stocks’ market valuations are closest to CAMP’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| TCS | 12 | 22644 | 1 |
| LMRK | 5 | 2531 | 1 |
| RIGL | 15 | 80038 | -1 |
| ANIK | 15 | 47624 | 1 |
| Average | 11.75 | 38209 | 0.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 11.75 hedge funds with bullish positions and the average amount invested in these stocks was $38 million. That figure was $85 million in CAMP’s case. Rigel Pharmaceuticals, Inc. (NASDAQ:RIGL) is the most popular stock in this table. On the other hand Landmark Infrastructure Partners LP (NASDAQ:LMRK) is the least popular one with only 5 bullish hedge fund positions. CalAmp Corp. (NASDAQ:CAMP) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. Unfortunately CAMP wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on CAMP were disappointed as the stock returned -18.1% during the same period 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 13 of these stocks already outperformed the market so far in Q2.
Disclosure: None. This article was originally published at Insider Monkey.
