Should You Avoid XO Group Inc (XOXO)?

The worries about the election and the ongoing uncertainty about the path of interest-rate increases have been keeping investors on the sidelines. Of course, most hedge funds and other asset managers have been underperforming main stock market indices since the middle of 2015. Interestingly though, smaller-cap stocks registered their best performance relative to the large-capitalization stocks since the end of the June quarter, suggesting that this may be the best time to take a cue from their stock picks. In fact, the Russell 2000 Index gained more than 15% since the beginning of the third quarter, while the Standard and Poor’s 500 benchmark returned less than 6%. This article will lay out and discuss the hedge fund and institutional investor sentiment towards XO Group Inc (NYSE:XOXO).

Is XO Group Inc (NYSE:XOXO) a sound investment now? Money managers are really taking a bearish view. The number of bullish hedge fund positions contracted by 1 recently. XOXO was in 15 hedge funds’ portfolios at the end of the third quarter of 2016. There were 16 hedge funds in our database with XOXO holdings at the end of the previous quarter. At the end of this article we will also compare XOXO to other stocks including General Communication, Inc. (NASDAQ:GNCMA), CSW Industrials Inc (NASDAQ:CSWI), and Aegean Marine Petroleum Network Inc. (NYSE:ANW) to get a better sense of its popularity.

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What have hedge funds been doing with XO Group Inc (NYSE:XOXO)?

At the end of the third quarter, a total of 15 of the hedge funds tracked by Insider Monkey were bullish on this stock, a drop of 6% from one quarter earlier. By comparison, 16 hedge funds held shares or bullish call options in XOXO heading into this year. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Renaissance Technologies, one of the biggest hedge funds in the world, holds the biggest position in XO Group Inc (NYSE:XOXO). Renaissance Technologies has a $27.1 million position in the stock. The second largest stake is held by John W. Rogers’ Ariel Investments which holds a $22.7 million position. Some other members of the smart money with similar optimism consist of David Park’s Headlands Capital, Wallace Weitz’s Wallace R. Weitz & Co. and D. E. Shaw’s D E Shaw. We should note that none of these hedge funds are 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.

Due to the fact that XO Group Inc (NYSE:XOXO) has experienced a decline in interest from hedge fund managers, we can see that there were a few hedgies that elected to cut their entire stakes last quarter. Intriguingly, Amish Mehta’s SQN Investors cut the biggest investment of the 700 funds monitored by Insider Monkey, totaling an estimated $6.5 million in stock, and Peter S. Park’s Park West Asset Management was right behind this move, as the fund said goodbye to about $3.6 million worth of shares.

Let’s also examine hedge fund activity in other stocks similar to XO Group Inc (NYSE:XOXO). We will take a look at General Communication, Inc. (NASDAQ:GNCMA), CSW Industrials Inc (NASDAQ:CSWI), Aegean Marine Petroleum Network Inc. (NYSE:ANW), and Tower International Inc (NYSE:TOWR). This group of stocks’ market caps are similar to XOXO’s market cap.

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 $65 million. That figure was $131 million in XOXO’s case. Aegean Marine Petroleum Network Inc. (NYSE:ANW) is the most popular stock in this table. On the other hand General Communication, Inc. (NASDAQ:GNCMA) is the least popular one with only 7 bullish hedge fund positions. XO Group Inc (NYSE:XOXO) 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 ANW might be a better candidate to consider taking a long position in.

Disclosure: None