Billionaire hedge fund managers such as Steve Cohen and Stan Druckenmiller can generate millions or even billions of dollars every year by pinning down high-potential small-cap stocks and pouring cash into these candidates. Small-cap stocks are overlooked by most investors, brokerage houses, and financial services hubs, while the unlimited research abilities of the big players within the hedge fund industry can easily identify the undervalued and high-potential stocks that reside the ignored corners of equity markets. There are numerous small-cap stocks that have turned out to be great winners, which is one of the main reasons the Insider Monkey team pays close attention to the hedge fund activity in relation to these stocks.
Citi Trends, Inc. (NASDAQ:CTRN) investors should be aware of an increase in hedge fund sentiment in recent months. CTRN was in 13 hedge funds’ portfolios at the end of the third quarter of 2016. There were 9 hedge funds in our database with CTRN positions at the end of the previous quarter. 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 Nam Tai Property Inc (NYSE:NTP), Digi International Inc. (NASDAQ:DGII), and Paratek Pharmaceuticals Inc (NASDAQ:PRTK) to gather more data points.
Follow Citi Trends Inc (NASDAQ:CTRN)
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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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How have hedgies been trading Citi Trends, Inc. (NASDAQ:CTRN)?
Heading into the fourth quarter of 2016, a total of 13 of the hedge funds tracked by Insider Monkey were long this stock, an increase of 44% from the second quarter of 2016. The graph below displays the number of hedge funds with bullish position in CTRN over the last 5 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.
When looking at the institutional investors followed by Insider Monkey, Wilmot B. Harkey and Daniel Mack’s Nantahala Capital Management holds the biggest position in Citi Trends, Inc. (NASDAQ:CTRN). Nantahala Capital Management has a $23.8 million position in the stock, comprising 2.9% of its 13F portfolio. Sitting at the No. 2 spot is Chuck Royce of Royce & Associates, with a $4.5 million position. Some other professional money managers that are bullish comprise D E Shaw, one of the biggest hedge funds in the world, Cliff Asness’ AQR Capital Management and Jim Simons’ Renaissance Technologies. We should note that Nantahala Capital Management is 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.
As industrywide interest jumped, some big names have been driving this bullishness. Ken Grossman and Glen Schneider of SG Capital Management established the biggest position in Citi Trends, Inc. (NASDAQ:CTRN). SG Capital Management had $1.6 million invested in the company at the end of the quarter. Mark Coe’s Coe Capital Management also made a $1.3 million investment in the stock during the quarter. The other funds with new positions in the stock are Peter Algert and Kevin Coldiron’s Algert Coldiron Investors, Ken Griffin’s Citadel Investment Group, and Gavin Saitowitz and Cisco J. del Valle’s Springbok Capital.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Citi Trends, Inc. (NASDAQ:CTRN) but similarly valued. We will take a look at Nam Tai Property Inc (NYSE:NTP), Digi International Inc. (NASDAQ:DGII), Paratek Pharmaceuticals Inc (NASDAQ:PRTK), and MannKind Corporation (NASDAQ:MNKD). This group of stocks’ market values are closest to CTRN’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| NTP | 6 | 29713 | 2 |
| DGII | 15 | 21063 | -1 |
| PRTK | 17 | 63710 | -4 |
| MNKD | 7 | 5336 | 1 |
As you can see these stocks had an average of 11 hedge funds with bullish positions and the average amount invested in these stocks was $30 million. That figure was $47 million in CTRN’s case. Paratek Pharmaceuticals Inc (NASDAQ:PRTK) is the most popular stock in this table. On the other hand Nam Tai Property Inc (NYSE:NTP) is the least popular one with only 6 bullish hedge fund positions. Citi Trends, Inc. (NASDAQ:CTRN) 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 PRTK might be a better candidate to consider taking a long position in.
Disclosure: None
