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 managers like Jeff Ubben, George Soros and Seth Klarman 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.
ExlService Holdings, Inc. (NASDAQ:EXLS) was in 10 hedge funds’ portfolios at the end of March. EXLS shareholders have witnessed a decrease in hedge fund interest of late. There were 11 hedge funds in our database with EXLS positions at the end of the previous quarter. Our calculations also showed that EXLS isn’t among the 30 most popular stocks among hedge funds.
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.
Let’s check out the key hedge fund action regarding ExlService Holdings, Inc. (NASDAQ:EXLS).
How have hedgies been trading ExlService Holdings, Inc. (NASDAQ:EXLS)?
At the end of the first quarter, a total of 10 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -9% from the previous quarter. By comparison, 13 hedge funds held shares or bullish call options in EXLS a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in ExlService Holdings, Inc. (NASDAQ:EXLS) was held by Renaissance Technologies, which reported holding $29.9 million worth of stock at the end of March. It was followed by Millennium Management with a $3.4 million position. Other investors bullish on the company included Dalton Investments, GLG Partners, and D E Shaw.
Since ExlService Holdings, Inc. (NASDAQ:EXLS) has witnessed a decline in interest from hedge fund managers, logic holds that there lies a certain “tier” of hedge funds that elected to cut their full holdings last quarter. Interestingly, Ken Griffin’s Citadel Investment Group sold off the largest stake of all the hedgies tracked by Insider Monkey, comprising close to $1.4 million in stock. Matthew Hulsizer’s fund, PEAK6 Capital Management, also said goodbye to its stock, about $0.3 million worth. These moves are interesting, as aggregate hedge fund interest fell by 1 funds last quarter.
Let’s now take a look at hedge fund activity in other stocks similar to ExlService Holdings, Inc. (NASDAQ:EXLS). We will take a look at PQ Group Holdings Inc. (NYSE:PQG), Transportadora de Gas del Sur SA (NYSE:TGS), Uniti Group Inc. (NASDAQ:UNIT), and Amkor Technology, Inc. (NASDAQ:AMKR). All of these stocks’ market caps resemble EXLS’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| PQG | 6 | 56295 | 2 |
| TGS | 12 | 33129 | 4 |
| UNIT | 21 | 249203 | 7 |
| AMKR | 25 | 88588 | 1 |
| Average | 16 | 106804 | 3.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 16 hedge funds with bullish positions and the average amount invested in these stocks was $107 million. That figure was $43 million in EXLS’s case. Amkor Technology, Inc. (NASDAQ:AMKR) is the most popular stock in this table. On the other hand PQ Group Holdings Inc. (NYSE:PQG) is the least popular one with only 6 bullish hedge fund positions. ExlService Holdings, Inc. (NASDAQ:EXLS) is not the least popular stock in this group but hedge fund interest is still below average. 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. A small number of hedge funds were also right about betting on EXLS, though not to the same extent, as the stock returned 6% during the same time frame and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.
