There are several ways to beat the market, and investing in small cap stocks has historically been one of them. We like to improve the odds of beating the market further by examining what famous hedge fund operators such as Carl Icahn and George Soros think. Those hedge fund operators make billions of dollars each year by hiring the best and the brightest to do research on stocks, including small cap stocks that big brokerage houses simply don’t cover. Because of Carl Icahn and other elite funds’ exemplary historical records, we pay attention to their small cap picks. In this article, we use hedge fund filing data to analyze Lumos Networks Corp (NASDAQ:LMOS).
The stock of the telecom company Lumos Networks Corp has declined by more than 33% and the number of funds with long positions in the company was trimmed by 1 during the third quarter. However, 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 SciQuest, Inc. (NASDAQ:SQI), Hi-Crush Partners LP (NYSE:HCLP), and Pacific Ethanol Inc (NASDAQ:PEIX) to gather more data points.
Follow Lumos Networks Corp. (NASDAQ:LMOS)
Follow Lumos Networks Corp. (NASDAQ:LMOS)
To the average investor, there are numerous methods shareholders use to assess their stock investments. A duo of the less utilized methods are hedge fund and insider trading interest. Our experts have shown that, historically, those who follow the top picks of the best money managers can outpace the market by a significant amount (see the details here).
Keeping this in mind, we’re going to check out the key action regarding Lumos Networks Corp (NASDAQ:LMOS).
How are hedge funds trading Lumos Networks Corp (NASDAQ:LMOS)?
Heading into Q4, a total of 11 of the hedge funds tracked by Insider Monkey were bullish on this stock, a fall of 8% from the previous quarter. With hedgies’ capital changing hands, there exists an “upper tier” of notable hedge fund managers who were upping their holdings significantly (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Eric Edidin and Josh Lobel’s Archer Capital Management has the number one position in Lumos Networks Corp (NASDAQ:LMOS), worth close to $31.1 million, accounting for 4.4% of its total 13F portfolio. The second largest stake is held by Shannon River Fund Management, led by Spencer M. Waxman, holding a $8.2 million position; the fund has 1.5% of its 13F portfolio invested in the stock. The remaining members of the smart money with similar optimism encompass Dov Gertzulin’s DG Capital Management, Israel Englander’s Millennium Management, and Jim Simons’ Renaissance Technologies.
Seeing as Lumos Networks Corp (NASDAQ:LMOS) has faced declining sentiment from the smart money, we can see that there exists a select few hedge funds that slashed their positions entirely last quarter. At the top of the heap, Jacob Gottlieb’s Visium Asset Management said goodbye to the largest position of the “upper crust” of funds monitored by Insider Monkey, totaling an estimated $3 million in stock.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Lumos Networks Corp (NASDAQ:LMOS) but similarly valued. These stocks are SciQuest, Inc. (NASDAQ:SQI), Hi-Crush Partners LP (NYSE:HCLP), Pacific Ethanol Inc (NASDAQ:PEIX), and KemPharm Inc (NASDAQ:KMPH). This group of stocks’ market caps are closest to LMOS’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SQI | 13 | 58282 | 0 |
| HCLP | 11 | 14719 | 2 |
| PEIX | 13 | 22055 | -5 |
| KMPH | 8 | 60941 | -2 |
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 $39 million. That figure was $60 million in LMOS’s case. SciQuest, Inc. (NASDAQ:SQI) and Pacific Ethanol Inc (NASDAQ:PEIX) are the most popular stocks in this table. On the other hand KemPharm Inc (NASDAQ:KMPH) is the least popular one with only 8 bullish hedge fund positions. Lumos Networks Corp (NASDAQ:LMOS) is not the least popular stock in this group, but it has the same number of funds with long positions as the average for the four stocks in the table. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard SQI or PEIZ might be better candidates to consider a long position.
