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.
Is Changyou.Com Ltd (ADR) (NASDAQ:CYOU) a cheap investment now? Money managers are taking a pessimistic view. The number of bullish hedge fund bets shrunk by 3 in recent months. At the end of this article we will also compare CYOU to other stocks including NetGear, Inc. (NASDAQ:NTGR), Encore Capital Group, Inc. (NASDAQ:ECPG), and Inphi Corporation (NYSE:IPHI) to get a better sense of its popularity.
Follow Changyou Com Ltd (NASDAQ:CYOU)
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With all of this in mind, let’s analyze the new action surrounding Changyou.Com Ltd (ADR) (NASDAQ:CYOU).
What have hedge funds been doing with Changyou.Com Ltd (ADR) (NASDAQ:CYOU)?
At Q3’s end, a total of 9 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -25% from one quarter earlier. With hedgies’ sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were boosting their stakes significantly (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, TCS Capital Management, managed by Eric Semler, holds the biggest position in Changyou.Com Ltd (ADR) (NASDAQ:CYOU). TCS Capital Management has a $5.2 million position in the stock, comprising 4.2% of its 13F portfolio. On TCS Capital Management’s heels is Jim Simons of Renaissance Technologies, with a $3.4 million position; less than 0.1% of its 13F portfolio is allocated to the company. Remaining hedge funds and institutional investors that hold long positions include D E Shaw, John Overdeck and David Siegel’s Two Sigma Advisors and Israel Englander’s Millennium Management.
Because Changyou.Com Ltd (ADR) (NASDAQ:CYOU) has experienced falling interest from the smart money, logic holds that there was a specific group of fund managers that decided to sell off their entire stakes in the third quarter. Intriguingly, Jacob Gottlieb’s Visium Asset Management dropped the biggest stake of all the hedgies monitored by Insider Monkey, comprising about $0.5 million in stock, and Peter Muller’s PDT Partners was right behind this move, as the fund dumped about $0.4 million worth. These transactions are interesting, as aggregate hedge fund interest fell by 3 funds in the third quarter.
Let’s now review hedge fund activity in other stocks similar to Changyou.Com Ltd (ADR) (NASDAQ:CYOU). These stocks are NetGear, Inc. (NASDAQ:NTGR), Encore Capital Group, Inc. (NASDAQ:ECPG), Inphi Corporation (NYSE:IPHI), and Remy International Inc (NASDAQ:REMY). This group of stocks’ market caps are closest to CYOU’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| NTGR | 20 | 99055 | 9 |
| ECPG | 10 | 79614 | -2 |
| IPHI | 19 | 73384 | 5 |
| REMY | 20 | 245881 | -2 |
As you can see these stocks had an average of 17.25 hedge funds with bullish positions and the average amount invested in these stocks was $124 million. That figure was $13 million in CYOU’s case. NetGear, Inc. (NASDAQ:NTGR) is the most popular stock in this table. On the other hand Encore Capital Group, Inc. (NASDAQ:ECPG) is the least popular one with only 10 bullish hedge fund positions. Compared to these stocks Changyou.Com Ltd (ADR) (NASDAQ:CYOU) is even less popular than ECPG. Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case more research is warranted.
