Should You Add Build-A-Bear Workshop, Inc (BBW) to Your Portfolio?

Investing in hedge funds can bring large profits, but it’s not for everybody, since hedge funds are available only for high-net-worth individuals. They generate significant returns for investors to justify their large fees and they allocate a lot of time and employ a complex analysis to determine the best stocks to invest in. A particularly interesting group of stocks that hedge funds like is the small-caps. The huge amount of capital does not allow hedge funds to invest a lot in small-caps, but our research showed that their most popular small-cap ideas are less efficiently priced and generate stronger returns than their large- and mega-cap picks and the broader market. That is why we follow the hedge fund activity in the small-cap space.

Build-A-Bear Workshop, Inc (NYSE:BBW) shares didn’t see a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 12 hedge funds’ portfolios at the end of September. 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 Credit Suisse AM Inc Fund Inc. (NYSEMKT:CIK), Everi Holdings Inc (NYSE:EVRI), and Vectrus Inc (NYSE:VEC) to gather more data points.

We follow over 700 hedge funds and other institutional investors and by analyzing their quarterly 13F filings, we identify stocks that they are collectively bullish on and develop investment strategies based on this data. One strategy that outperformed the market over the last year involves selecting the 100 best-performing funds and identifying the 30 mid-cap stocks that they are collectively most bullish on. Over the past year, this strategy generated returns of 18%, topping the 8% gain registered by S&P 500 ETFs. We launched this strategy 2.5 years ago and it returned more than 39% since then, vs. 22% gain registered by the S&P 500 ETFs.

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How are hedge funds trading Build-A-Bear Workshop, Inc (NYSE:BBW)?

At the end of the third quarter, a total of 12 of the hedge funds tracked by Insider Monkey were bullish on this stock, unchanged from the previous quarter. On the other hand, there were a total of 15 hedge funds with a bullish position in BBW at the beginning of this year. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).

According to Insider Monkey’s hedge fund database, Nokomis Capital, led by Brett Hendrickson, holds the largest position in Build-A-Bear Workshop, Inc (NYSE:BBW). Nokomis Capital has a $14.5 million position in the stock, comprising 3.1% of its 13F portfolio. On Nokomis Capital’s heels is Renaissance Technologies, one of the largest hedge funds in the world, with a $6.4 million position. Remaining hedge funds and institutional investors that are bullish contain J. Carlo Cannell’s Cannell Capital, Jack Ripsteen’s Potrero Capital Research and Chuck Royce’s Royce & Associates. We should note that Potrero Capital Research is among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.

We already know that not all hedge funds are bullish on the stock and some hedge funds actually dumped their positions entirely. At the top of the heap, Adam Wright and Gary Kohler’s Blue Clay Capital dumped the biggest stake of all the hedgies studied by Insider Monkey, comprising an estimated $0.6 million in stock. Israel Englander’s fund, Millennium Management, also dumped its stock, about $0.3 million worth.

Let’s check out hedge fund activity in other stocks similar to Build-A-Bear Workshop, Inc (NYSE:BBW). These stocks are Credit Suisse AM Inc Fund Inc. (NYSEMKT:CIK), Everi Holdings Inc (NYSE:EVRI), Vectrus Inc (NYSE:VEC), and Sientra Inc (NASDAQ:SIEN). This group of stocks’ market values are similar to BBW’s market value.

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 $29 million. That figure was $40 million in BBW’s case. Everi Holdings Inc (NYSE:EVRI) is the most popular stock in this table. On the other hand Credit Suisse AM Inc Fund Inc. (NYSEMKT:CIK) is the least popular one with only 2 bullish hedge fund positions. Build-A-Bear Workshop, Inc (NYSE:BBW) 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 EVRI might be a better candidate to consider taking a long position in.

Disclosure: None