At Insider Monkey we track the activity of some of the best-performing hedge funds like Appaloosa Management, Baupost, and Third Point because we determined that some of the stocks that they are collectively bullish on can help us generate returns above the broader indices. Out of thousands of stocks that hedge funds invest in, small-caps can provide the best returns over the long term due to the fact that these companies are less efficiently priced and are usually under the radars of mass-media, analysts and dumb money. This is why we follow the smart money moves in the small-cap space.
Is Supercom Ltd (NASDAQ:SPCB) an exceptional investment today? Money managers are getting less bullish. The number of long hedge fund bets shrunk by 3 in recent months. Echoing a similar sentiment, the shares of Supercom Ltd (NASDAQ:SPCB) lost 36.91% value during the last quarter. For a better understanding of hedge fund sentiment, we will find out more about the hedge funds that held stakes in the company, at the end of the last 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 Consumer Portfolio Services, Inc. (NASDAQ:CPSS), Veracyte Inc (NASDAQ:VCYT), and Cadiz Inc (NASDAQ:CDZI) to gather more data points.
At the moment, there are a large number of signals market participants use to evaluate their stock investments. Some of the less known signals are hedge fund and insider trading moves. We have shown that, historically, those who follow the best picks of the elite investment managers can beat the broader indices by a significant margin (see the details here).
Keeping this in mind, we’re going to take a peek at the key action encompassing Supercom Ltd (NASDAQ:SPCB).
What have hedge funds been doing with Supercom Ltd (NASDAQ:SPCB)?
At the end of Q3, a total of 8 of the hedge funds tracked by Insider Monkey held long positions in this stock, a decrease of 27% from the previous quarter. With the smart money’s sentiment swirling, there exists a few noteworthy hedge fund managers who were boosting their stakes meaningfully (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Brett Hendrickson’s Nokomis Capital has the number one position in Supercom Ltd (NASDAQ:SPCB), worth close to $2.8 million, amounting to 0.8% of its total 13F portfolio. Coming in second is Royce & Associates, managed by Chuck Royce, which holds a $1.6 million position; less than 0.1% of its 13F portfolio is allocated to the company. Remaining peers that hold long positions encompass Israel Englander’s Millennium Management, Andy Redleaf’s Whitebox Advisors, and Renaissance Technologies.
Seeing as Supercom Ltd (NASDAQ:SPCB) has faced a bearish sentiment from the entirety of the hedge funds we track, we can see that there was a specific group of money managers that decided to sell off their entire stakes by the end of the third quarter. At the top of the heap, Jeffrey Moskowitz’s Harvey Partners said goodbye to the biggest stake of the 700 funds monitored by Insider Monkey, valued at close to $3.2 million in stock. Mark Coe’s fund, Coe Capital Management, also dropped its stock, about $1 million worth of shares. These bearish behaviors are interesting, as total hedge fund interest dropped by 3 funds by the end of the third quarter.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Supercom Ltd (NASDAQ:SPCB) but similarly valued. We will take a look at Consumer Portfolio Services, Inc. (NASDAQ:CPSS), Veracyte Inc (NASDAQ:VCYT), Cadiz Inc (NASDAQ:CDZI), and Layne Christensen Company (NASDAQ:LAYN). This group of stocks’ market values are closest to Supercom Ltd (NASDAQ:SPCB)’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CPSS | 13 | 21502 | 0 |
| VCYT | 10 | 25609 | 1 |
| CDZI | 6 | 20233 | 0 |
| LAYN | 9 | 46127 | -7 |
As you can see, these stocks had an average of 10 hedge funds with bullish positions and the average amount invested in these stocks was $28 million. That figure was $7 million in Supercom Ltd (NASDAQ:SPCB)’s case. Consumer Portfolio Services, Inc. (NASDAQ:CPSS) is the most popular stock in this table. On the other hand, Cadiz Inc (NASDAQ:CDZI) is the least popular one with only 6 bullish hedge fund positions. Supercom Ltd (NASDAQ:SPCB) 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, Consumer Portfolio Services, Inc. (NASDAQ:CPSS) might be a better candidate to consider a long position.