Should You Avoid TiVo Inc. (TIVO)?

Between June 25 and October 30th the Russell 2000 ETF (IWM) lagged the larger S&P 500 ETF (SPY) by more than 14 percentage points as investors worried over the possible ramifications of rising interest rates. The hedge funds and institutional investors we track typically invest more in smaller-cap stocks than an average investor, and we have seen data that shows those funds paring back their overall exposure. Those funds cutting positions in small-caps is one reason why volatility has increased. In the following paragraphs, we take a closer look at what hedge funds and prominent investors think of TiVo Inc. (NASDAQ:TIVO) and see how the stock is affected by the recent hedge fund activity.

TiVo Inc. (NASDAQ:TIVO) was in 16 hedge funds’ portfolios at the end of September. TIVO shareholders have witnessed a decrease in hedge fund interest lately. There were 18 hedge funds in our database with TIVO holdings at the end of the previous 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 BNC Bancorp (NASDAQ:BNCN), Civitas Solutions Inc (NYSE:CIVI), and E-House (China) Holdings Limited (ADR) (NYSE:EJ) to gather more data points.

According to most investors, hedge funds are viewed as unimportant, old financial vehicles of years past. While there are over an 8000 funds trading at present, Our experts choose to focus on the bigwigs of this group, approximately 700 funds. It is estimated that this group of investors control the majority of the smart money’s total asset base, and by following their highest performing stock picks, Insider Monkey has come up with various investment strategies that have historically outperformed Mr. Market. Insider Monkey’s small-cap hedge fund strategy outpaced the S&P 500 index by 12 percentage points annually for a decade in their back tests.

Now, we’re going to review the fresh action surrounding TiVo Inc. (NASDAQ:TIVO).

How have hedgies been trading TiVo Inc. (NASDAQ:TIVO)?

Heading into Q4, a total of 16 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -11% from one quarter earlier. With the smart money’s sentiment swirling, there exists an “upper tier” of notable hedge fund managers who were boosting their stakes significantly (or already accumulated large positions).

Of the funds tracked by Insider Monkey, Joel Greenblatt’s Gotham Asset Management has the biggest position in TiVo Inc. (NASDAQ:TIVO), worth close to $25.3 million, amounting to 0.2% of its total 13F portfolio. The second most bullish fund manager is D E Shaw, holding a $14.7 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Other professional money managers with similar optimism encompass Israel Englander’s Millennium Management, Peter S. Park’s Park West Asset Management and Jim Simons’ Renaissance Technologies.

Because TiVo Inc. (NASDAQ:TIVO) has witnessed a drop in interest from the smart money, it’s safe to say that there lies a certain “tier” of funds who sold off their positions entirely by the end of the third quarter. At the top of the heap, James Dondero’s Highland Capital Management dropped the largest position of all the hedgies followed by Insider Monkey, worth an estimated $3.4 million in stock, and Paul Marshall and Ian Wace’s Marshall Wace LLP was right behind this move, as the fund dropped about $0.6 million worth of shares. These moves are intriguing to say the least, as total hedge fund interest fell by 2 funds by the end of the third quarter.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as TiVo Inc. (NASDAQ:TIVO) but similarly valued. We will take a look at BNC Bancorp (NASDAQ:BNCN), Civitas Solutions Inc (NYSE:CIVI), E-House (China) Holdings Limited (ADR) (NYSE:EJ), and Terreno Realty Corporation (NYSE:TRNO). This group of stocks’ market valuations match TIVO’s market valuation.

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 $46 million, above the $98 million in TIVO’s case. E-House (China) Holdings Limited (ADR) (NYSE:EJ) is the most popular stock in this table, as 15 funds hold long positions in the company. On the other hand, Civitas Solutions Inc (NYSE:CIVI) is the least popular one with only 7 bullish hedge fund positions. Compared to these stocks, TiVo Inc. (NASDAQ:TIVO) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.