The market has been volatile as the Federal Reserve winds down its easy money policies. Small cap stocks have been hit hard as a result, as the Russell 2000 ETF (IWM) has underperformed the larger S&P 500 ETF (SPY) by more than 14 percentage points between June 25th and the end of October. SEC filings and hedge fund investor letters indicate that the smart money seems to be paring back their overall long exposure, and the funds’ movements is one of the reasons why the major indexes have retraced. In this article, we analyze what the smart money thinks of TrueCar Inc (NASDAQ:TRUE) and find out how it is affected by hedge funds’ moves.
Is TrueCar Inc (NASDAQ:TRUE) a good investment today? The stock lost 45% of its value in July and 55% of its value during the third quarter. We were wondering whether hedge funds saw this as a buying opportunity or not. Unfortunately our calculations show that hedge funds have been selling their holdings as well. The number of bullish hedge fund bets fell by 5 during the third quarter. At the end of this article we will also compare TRUE to other stocks including AK Steel Holding Corporation (NYSE:AKS), Ascendis Pharma A/S (NASDAQ:ASND), and Tredegar Corporation (NYSE:TG) to get a better sense of its popularity.
According to most stock holders, hedge funds are perceived as underperforming, old financial vehicles of yesteryear. While there are greater than 8000 funds with their doors open today, Our experts choose to focus on the top tier of this group, approximately 700 funds. Most estimates calculate that this group of people manage bulk of all hedge funds’ total asset base, and by monitoring their inimitable stock picks, Insider Monkey has figured out various investment strategies that have historically exceeded the market. Insider Monkey’s small-cap hedge fund strategy beat the S&P 500 index by 12 percentage points annually for a decade in their back tests.
Now, we’re going to take a gander at the recent action encompassing TrueCar Inc (NASDAQ:TRUE).
What have hedge funds been doing with TrueCar Inc (NASDAQ:TRUE)?
At the end of the third quarter, a total of 11 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -31% from the second quarter. With hedgies’ sentiment swirling, there exists a few key hedge fund managers who were boosting their stakes considerably (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Paul Reeder and Edward Shapiro’s PAR Capital Management has the number one position in TrueCar Inc (NASDAQ:TRUE), worth close to $42.9 million, corresponding to 0.9% of its total 13F portfolio. On PAR Capital Management’s heels is Karthik Sarma of SRS Investment Management, with a $14.7 million position; the fund has 0.5% of its 13F portfolio invested in the stock. Other professional money managers that hold long positions consist of Dennis Leibowitz’s Act II Capital, Michael Pollack’s Destrier Capital and Lei Zhang’s Hillhouse Capital Management.
Due to the fact that TrueCar Inc (NASDAQ:TRUE) has faced declining sentiment from the smart money, it’s easy to see that there were a few hedgies that elected to cut their entire stakes last quarter. At the top of the heap, Doug Gordon, Jon Hilsabeck and Don Jabro’s Shellback Capital dumped the largest stake of the 700 funds watched by Insider Monkey, worth an estimated $2.2 million in stock, and Chuck Royce’s Royce & Associates was right behind this move, as the fund cut about $1.7 million worth. These moves are interesting, as total hedge fund interest fell by 5 funds last quarter.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as TrueCar Inc (NASDAQ:TRUE) but similarly valued. We will take a look at AK Steel Holding Corporation (NYSE:AKS), Ascendis Pharma A/S (NASDAQ:ASND), Tredegar Corporation (NYSE:TG), and Moneygram International Inc (NYSE:MGI). This group of stocks’ market caps are closest to TRUE’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| AKS | 19 | 53452 | -1 |
| ASND | 13 | 91218 | -6 |
| TG | 7 | 64292 | -2 |
| MGI | 13 | 81088 | 2 |
As you can see these stocks had an average of 13 hedge funds with bullish positions and the average amount invested in these stocks was $73 million. That figure was $69 million in TRUE’s case. AK Steel Holding Corporation (NYSE:AKS) is the most popular stock in this table. On the other hand Tredegar Corporation (NYSE:TG) is the least popular one with only 7 bullish hedge fund positions. TrueCar Inc (NASDAQ:TRUE) 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 AKS might be a better candidate to consider a long position.
