Is Jamba, Inc. (JMBA) A Good Stock To Buy?

Looking for high-potential stocks? Just follow the big players within the hedge fund industry! This is not an ad, but let’s take a brief look at what statistics has to say about hedge funds’ stock picking abilities. The Standard and Poor’s 500 Index returned approximately 5.2% in the 12 months ending October 30, with more than 51% of the stocks in the index failing to beat the benchmark. Therefore, the odds that one will pin down a ‘winner’ by randomly picking a stock are less than the odds in a fair coin-tossing game. Conversely, hedge funds’ 30 preferred S&P 500 stocks (as of September 2014) generated a return of 9.5% during the same 12-month period, while 63% of these stock picks outperformed the broader market benchmark. Coincidence? It might happen to be so, but it is unlikely. Our research covering a 16-year period indicates that hedge funds’ stock picks generate superior risk-adjusted returns. That’s why we believe it is wise to check hedge fund activity before you invest your time or your savings on a stock like Jamba, Inc. (NASDAQ:JMBA).

Is Jamba, Inc. (NASDAQ:JMBA) a buy, sell, or hold? Money managers are reducing their bets on the stock. The number of long hedge fund positions was cut by 3 in recent months. JMBA was in 8 hedge funds’ portfolios at the end of September. There were 11 hedge funds in our database with JMBA holdings 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 InVitae Corp (NYSE:NVTA), Garrison Capital Inc (NASDAQ:GARS), and Heritage-Crystal Clean, Inc. (NASDAQ:HCCI) to gather more data points.

If you’d ask most investors, hedge funds are seen as worthless, old investment tools of years past. While there are over 8000 funds trading today, our experts look at the leaders of this group, approximately 700 funds. It is estimated that this group of investors handle the lion’s share of the smart money’s total asset base, and by keeping an eye on their top picks, Insider Monkey has spotted many investment strategies that have historically surpassed the broader indices. Insider Monkey’s small-cap hedge fund strategy outstripped the S&P 500 index by 12 percentage points per year for a decade in their back tests.

Keeping this in mind, let’s take a gander at the fresh action encompassing Jamba, Inc. (NASDAQ:JMBA).

What does the smart money think about Jamba, Inc. (NASDAQ:JMBA)?

Heading into Q4, a total of 8 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -27% from the second quarter. With the smart money’s sentiment swirling, there exists a few notable hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).

According to Insider Monkey’s hedge fund database, Glenn W. Welling’s Engaged Capital has the most valuable position in Jamba, Inc. (NASDAQ:JMBA), worth close to $24 million, accounting for 13.7% of its total 13F portfolio. On Engaged Capital’s heels is Indus Capital, led by David Kowitz and Sheldon Kasowitz, holding an $18.5 million position; 2.5% of its 13F portfolio is allocated to the stock. Remaining professional money managers with similar optimism encompass David Kowitz and Sheldon Kasowitz’s Indus Capital, Gregg J. Powers’s Private Capital Management and Gregory Bylinsky and Jefferson Gramm’s Bandera Partners.

Judging by the fact that Jamba, Inc. (NASDAQ:JMBA) has faced declining sentiment from the smart money, logic holds that there exists a select few money managers that decided to sell off their positions entirely last quarter. Interestingly, Jonathan Lennon’s Pleasant Lake Partners dropped the largest position of all the hedgies monitored by Insider Monkey, comprising close to $0.9 million in stock, and Israel Englander of Millennium Management was right behind this move, as the fund cut about $0.4 million worth of shares. These moves are interesting, as total hedge fund interest dropped by 3 funds last quarter.

Let’s check out hedge fund activity in other stocks similar to Jamba, Inc. (NASDAQ:JMBA). We will take a look at InVitae Corp (NYSE:NVTA), Garrison Capital Inc (NASDAQ:GARS), Heritage-Crystal Clean, Inc. (NASDAQ:HCCI), and Proteon Therapeutics Inc (NASDAQ:PRTO). This group of stocks’ market values match JMBA’s market value.

As you can see these stocks had an average of 5.5 hedge funds with bullish positions and the average amount invested in these stocks was $39 million, which is below the $64 million that hedge funds have collectively amassed in JMBA. InVitae Corp (NYSE:NVTA) is the most popular stock in this table, while Heritage-Crystal Clean, Inc. (NASDAQ:HCCI) is the least popular one with only 4 bullish hedge fund positions. Jamba, Inc. (NASDAQ:JMBA) 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 NVTA might be a better candidate to consider a long position.