We have been waiting for this for a year and finally the third quarter ended up showing a nice bump in the performance of small-cap stocks. Both the S&P 500 and Russell 2000 were up since the end of the second quarter, but small-cap stocks outperformed the large-cap stocks by double digits. This is important for hedge funds, which are big supporters of small-cap stocks, because their investors started pulling some of their capital out due to poor recent performance. It is very likely that equity hedge funds will deliver better risk adjusted returns in the second half of this year. In this article we are going to look at how this recent market trend affected the sentiment of hedge funds towards Care.com Inc (NYSE:CRCM), and what that likely means for the prospects of the company and its stock.
Care.com Inc (NYSE:CRCM) was in 13 hedge funds’ portfolios at the end of the third quarter of 2016. CRCM investors should pay attention to an increase in enthusiasm from smart money recently. There were 12 hedge funds in our database with CRCM positions at the end of the previous quarter. At the end of this article we will also compare CRCM to other stocks including America’s Car-Mart, Inc. (NASDAQ:CRMT), NVE Corporation (NASDAQ:NVEC), and Foamix Pharmaceuticals Ltd (NASDAQ:FOMX) to get a better sense of its popularity.
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What have hedge funds been doing with Care.com Inc (NYSE:CRCM)?
At the end of the third quarter, a total of 13 of the hedge funds tracked by Insider Monkey were bullish on this stock, an 8% uptick from the previous quarter. Below, you can check out the change in hedge fund sentiment towards CRCM over the last 5 quarters, which remained flat in the first-half of this year. With hedge funds’ sentiment swirling, there exists a few notable hedge fund managers who were increasing their holdings meaningfully (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Chuck Royce’s Royce & Associates has the biggest position in Care.com Inc (NYSE:CRCM), worth close to $15.2 million. The second most bullish fund manager is Portolan Capital Management, led by George McCabe, holding an $11.5 million position; the fund has 1.6% of its 13F portfolio invested in the stock. Some other members of the smart money that are bullish comprise Renaissance Technologies, one of the largest hedge funds in the world, Bryant Regan’s Lafitte Capital Management, and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet 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.
Now, some big names have jumped into Care.com Inc (NYSE:CRCM) headfirst. Hutchin Hill Capital, led by Neil Chriss, assembled the most valuable position in Care.com Inc (NYSE:CRCM). Hutchin Hill Capital had $0.3 million invested in the company at the end of the quarter. Glenn Russell Dubin’s Highbridge Capital Management also made a $0.2 million investment in the stock during the quarter.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Care.com Inc (NYSE:CRCM) but similarly valued. We will take a look at America’s Car-Mart, Inc. (NASDAQ:CRMT), NVE Corporation (NASDAQ:NVEC), Foamix Pharmaceuticals Ltd (NASDAQ:FOMX), and PHI Inc. (NASDAQ:PHIIK). This group of stocks’ market valuations are similar to CRCM’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CRMT | 7 | 82666 | 1 |
| NVEC | 5 | 29834 | 0 |
| FOMX | 18 | 124277 | 1 |
| PHIIK | 9 | 76716 | 0 |
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 $78 million. That figure was $48 million in CRCM’s case. Foamix Pharmaceuticals Ltd (NASDAQ:FOMX) is the most popular stock in this table. On the other hand NVE Corporation (NASDAQ:NVEC) is the least popular one with only 5 bullish hedge fund positions. Care.com Inc (NYSE:CRCM) 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. In this regard FOMX might be a better candidate to consider taking a long position in.
Disclosure: None