Hedge funds and other investment firms run by legendary investors like Israel Englander and Ray Dalio are entrusted to manage billions of dollars of accredited investors’ money because they are without peer in the resources they use to identify the best investments for their chosen investment horizon. Moreover, they are more willing to invest a greater amount of their resources in small-cap stocks than big brokerage houses, and this is often where they generate their outperformance, which is why we pay particular attention to their best ideas in this space.
Cray Inc. (NASDAQ:CRAY) investors should be aware of a decrease in support from the world’s most successful money managers of late. CRAY was in 13 hedge funds’ portfolios at the end of the third quarter of 2016. There were 18 hedge funds in our database with CRAY 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 Bottomline Technologies (NASDAQ:EPAY), Hertz Global Holdings Inc (NYSE:HRI), and Advanced Accelerator Application SA(ADR) (NASDAQ:AAAP) to gather more data points.
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.
Carol Gauthier/Shutterstock.com
Hedge fund activity in Cray Inc. (NASDAQ:CRAY)
At Q3’s end, a total of 13 of the hedge funds tracked by Insider Monkey were long this stock, down by 28% from the previous quarter. On the other hand, there were a total of 14 hedge funds with a bullish position in CRAY at the beginning of this year. With the smart money’s sentiment swirling, there exists a few notable hedge fund managers who were upping their stakes meaningfully (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Cliff Asness’ AQR Capital Management has the largest position in Cray Inc. (NASDAQ:CRAY), worth close to $8.3 million. The second largest stake is held by Chuck Royce of Royce & Associates, with a $5.3 million position. Other members of the smart money with similar optimism comprise Ken Griffin’s Citadel Investment Group, Renaissance Technologies, one of the largest hedge funds in the world, and David Costen Haley’s HBK Investments. 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.
We already know that not all hedge funds are bullish on the stock and some hedge funds actually got rid of their positions entirely. Intriguingly, Joel Greenblatt’s Gotham Asset Management got rid of the biggest position of all the hedgies tracked by Insider Monkey, comprising an estimated $15.2 million in stock, and Neil Chriss’ Hutchin Hill Capital was right behind this move, as the fund said goodbye to about $0.9 million worth of shares.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Cray Inc. (NASDAQ:CRAY) but similarly valued. These stocks are Bottomline Technologies (NASDAQ:EPAY), Hertz Global Holdings Inc (NYSE:HRI), Advanced Accelerator Application SA(ADR) (NASDAQ:AAAP), and Gogo Inc (NASDAQ:GOGO). This group of stocks’ market values are closest to CRAY’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| EPAY | 14 | 51273 | 3 |
| HRI | 28 | 469755 | 28 |
| AAAP | 7 | 138309 | 1 |
| GOGO | 21 | 183787 | 5 |
As you can see these stocks had an average of 17 hedge funds with bullish positions and the average amount invested in these stocks was $211 million. That figure was $30 million in CRAY’s case. Hertz Global Holdings Inc (NYSE:HRI) is the most popular stock in this table. On the other hand Advanced Accelerator Application SA(ADR) (NASDAQ:AAAP) is the least popular one with only 7 bullish hedge fund positions. Cray Inc. (NASDAQ:CRAY) 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 HRI might be a better candidate to consider taking a long position in.
Disclosure: None
