Is IZEA Worldwide Inc. (IZEA) A Good Stock To Buy?

We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do (like Melvin Capital’s recent GameStop losses). However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards IZEA Worldwide Inc. (NASDAQ:IZEA).

Is IZEA a good stock to buy? The smart money was buying. The number of long hedge fund positions rose by 5 lately. IZEA Worldwide Inc. (NASDAQ:IZEA) was in 5 hedge funds’ portfolios at the end of March. The all time high for this statistic was 2. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that IZEA isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings). There were 0 hedge funds in our database with IZEA holdings at the end of December.

So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 S&P 500 ETFs by more than 115 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.

Donald Sussman of Paloma Partners

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, an activist hedge fund owns nearly 40% of this $23 biotech stock and is trying to buy the rest for around $50. So, we recommended a long position to our monthly premium newsletter subscribers. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Now let’s take a glance at the key hedge fund action surrounding IZEA Worldwide Inc. (NASDAQ:IZEA).

Do Hedge Funds Think IZEA Is A Good Stock To Buy Now?

At the end of the first quarter, a total of 5 of the hedge funds tracked by Insider Monkey were long this stock, a change of 5 from one quarter earlier. The graph below displays the number of hedge funds with bullish position in IZEA over the last 23 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

According to Insider Monkey’s hedge fund database, Millennium Management, managed by Israel Englander, holds the number one position in IZEA Worldwide Inc. (NASDAQ:IZEA). Millennium Management has a $1.8 million position in the stock, comprising less than 0.1%% of its 13F portfolio. The second largest stake is held by Citadel Investment Group, led by Ken Griffin, holding a $0.5 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Other hedge funds and institutional investors that are bullish include Ken Griffin’s Citadel Investment Group, Donald Sussman’s Paloma Partners and Michael Gelband’s ExodusPoint Capital. In terms of the portfolio weights assigned to each position Paloma Partners allocated the biggest weight to IZEA Worldwide Inc. (NASDAQ:IZEA), around 0.01% of its 13F portfolio. LMR Partners is also relatively very bullish on the stock, earmarking 0.0013 percent of its 13F equity portfolio to IZEA.

As aggregate interest increased, key money managers have jumped into IZEA Worldwide Inc. (NASDAQ:IZEA) headfirst. Millennium Management, managed by Israel Englander, established the biggest position in IZEA Worldwide Inc. (NASDAQ:IZEA). Millennium Management had $1.8 million invested in the company at the end of the quarter. Ken Griffin’s Citadel Investment Group also made a $0.5 million investment in the stock during the quarter. The other funds with new positions in the stock are Ken Griffin’s Citadel Investment Group, Donald Sussman’s Paloma Partners, and Michael Gelband’s ExodusPoint Capital.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as IZEA Worldwide Inc. (NASDAQ:IZEA) but similarly valued. These stocks are Penn Virginia Corporation (NASDAQ:PVAC), Osmotica Pharmaceuticals plc (NASDAQ:OSMT), Lantern Pharma Inc. (NASDAQ:LTRN), Consolidated Water Co. Ltd. (NASDAQ:CWCO), Spok Holdings Inc (NASDAQ:SPOK), Kuke Music Holding Limited (NYSE:KUKE), and AcelRx Pharmaceuticals Inc (NASDAQ:ACRX). All of these stocks’ market caps resemble IZEA’s market cap.

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As you can see these stocks had an average of 6.1 hedge funds with bullish positions and the average amount invested in these stocks was $11 million. That figure was $3 million in IZEA’s case. Penn Virginia Corporation (NASDAQ:PVAC) is the most popular stock in this table. On the other hand Kuke Music Holding Limited (NYSE:KUKE) is the least popular one with only 2 bullish hedge fund positions. IZEA Worldwide Inc. (NASDAQ:IZEA) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for IZEA is 58.8. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 17.4% in 2021 through June 18th and surpassed the market again by 6.1 percentage points. Unfortunately IZEA wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); IZEA investors were disappointed as the stock returned -32.1% since the end of March (through 6/18) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2021.

Disclosure: None. This article was originally published at Insider Monkey.

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