Is TubeMogul Inc (TUBE) A Good Stock To Buy?

At Insider Monkey, we pore over the filings of more than 700 top investment firms every quarter, a process we have now completed for the latest reporting period. The data we’ve gathered as a result gives us access to a wealth of collective knowledge based on these firms’ portfolio holdings as of September 30. In this article, we will use that wealth of knowledge to determine whether or not TubeMogul Inc (NASDAQ:TUBE) makes for a good investment right now.

TubeMogul is a small-cap enterprise software company engaged in digital branding and digital video advertising. The company’s stock lost 25% in the third quarter, but the hedge fund sentiment remained unchanged. The stock was in 10 hedge funds’ portfolios at the end of the third quarter of 2015. At the end of this article we will also compare TUBE to other stocks, including Ascent Capital Group Inc (NASDAQ:ASCMA), Park-Ohio Holdings Corp. (NASDAQ:PKOH), and Citi Trends, Inc. (NASDAQ:CTRN) to get a better sense of its popularity.

If you’d ask most shareholders, hedge funds are seen as unimportant, outdated investment vehicles of the past. While there are more than 8000 funds in operation at present, Our researchers look at the upper echelon of this club, around 700 funds. It is estimated that this group of investors orchestrate most of all hedge funds’ total asset base, and by observing their inimitable investments, Insider Monkey has brought to light several investment strategies that have historically outstripped the S&P 500 index. Insider Monkey’s small-cap hedge fund strategy exceeded the S&P 500 index by 12 percentage points annually for a decade in their back tests.

Keeping this in mind, let’s check out the recent action surrounding TubeMogul Inc (NASDAQ:TUBE).

How have hedgies been trading TubeMogul Inc (NASDAQ:TUBE)?

Heading into Q4, a total of 10 of the hedge funds tracked by Insider Monkey were long this stock. With the smart money’s sentiment swirling, there exists an “upper tier” of key hedge fund managers who were upping their stakes substantially (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Discovery Group, managed by Michael Murphy and Daniel Donoghue, holds the number one position in TubeMogul Inc (NASDAQ:TUBE). Discovery Group has a $23.1 million position in the stock, comprising 7.9% of its 13F portfolio. On Discovery Group’s heels is Alyeska Investment Group, led by Anand Parekh, holding a $12.8 million position; 0.2% of its 13F portfolio is allocated to the company. Some other members of the smart money with similar optimism encompass Phill Gross and Robert Atchinson’s Adage Capital Management, Joseph A. Jolson’s Harvest Capital Strategies, and Seymour Sy Kaufman and Michael Stark’s Crosslink Capital.

Due to the fact that TubeMogul Inc (NASDAQ:TUBE) has witnessed falling interest from the entirety of the hedge funds we track, logic holds that there was a specific group of hedge funds who sold off their full holdings by the end of the third quarter. Interestingly, Ken Griffin’s Citadel Investment Group cut the biggest stake of the 700 funds watched by Insider Monkey, totaling an estimated $3.4 million in stock. Nick Niell’s fund, Arrowgrass Capital Partners, also said goodbye to its stock, about $2.7 million worth. These transactions are interesting, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as TubeMogul Inc (NASDAQ:TUBE) but similarly valued. We will take a look at Ascent Capital Group Inc (NASDAQ:ASCMA), Park-Ohio Holdings Corp. (NASDAQ:PKOH), Citi Trends, Inc. (NASDAQ:CTRN), and Schnitzer Steel Industries, Inc. (NASDAQ:SCHN). This group of stocks’ market valuations resemble TUBE’s market valuation.

As you can see these stocks had an average of 14 hedge funds with bullish positions and the average amount invested in these stocks was $68 million. That figure was $48 million in TUBE’s case. Citi Trends, Inc. (NASDAQ:CTRN) is the most popular stock in this table. On the other hand Park-Ohio Holdings Corp. (NASDAQ:PKOH) is the least popular one with only 6 bullish hedge fund positions. TubeMogul Inc (NASDAQ:TUBE) 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 CTRN might be a better candidate to consider a long position.