Hedge funds were positive on World Acceptance Corp. (NASDAQ:WRLD) heading into this quarter, with a total of 13 of the hedge funds tracked by Insider Monkey being long in this stock, a change of 18% from the previous quarter. Invested capital meanwhile rose nearly 50% to $56 million from $38 million.
Of the funds tracked by Insider Monkey, Edward Goodnow‘s Goodnow Investment Group had the largest position in World Acceptance Corp. (NASDAQ:WRLD), worth close to $28.2 million. Other hedgies with similar optimism included Peter Muller’s PDT Partners, Nathaniel August’s Mangrove Partners, and Jim Simons‘ Renaissance Technologies.
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We also believe this stock makes for a good buying opportunity at its current depressed levels.
Lastly is TrovaGene Inc (NASDAQ:TROV), which fared better than the previous stocks, but nonetheless slumped by more than 12% today. Interestingly, TrovaGene’s dip came despite an analyst (Maxim Group) initiating coverage on the stock with a ‘Buy’ rating this morning. There appears to have been no major catalyst behind the dip, with shares simply trending downward due to bearish sentiment, including a put/call ratio that hit the 1.10 mark as shares of TrovaGene trade at obscene levels from where they began the year, still up by over 110% year-to-date.
That performance has been a major coup for Roberto Mignone’s Bridger Management, as it increased its position in TrovaGene Inc (NASDAQ:TROV) during the first quarter to 2.85 million shares. Just five funds had positions in the stock heading into the second quarter, up from four at the end of 2014, while their invested capital increased to $28 million from $11 million, showing extreme bullishness, even factoring in the stock’s 43% appreciation during the quarter.
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Nonetheless, with shares up another 53% in the second quarter, even including the dip today, it’s hard to recommend this stock to anyone. We don’t think the dip today makes for an attractive enough entry point and investors should look elsewhere.
It is well-known that hedge funds have under-performed the S&P 500 based on net returns over the past several years. But we are missing something very important here. Hedge funds generally pull in strong returns from their top small-cap stocks and invest a lot of their resources into analyzing these stocks. They simply don’t take large enough positions in them relative to their portfolios to generate strong overall returns because their large-cap picks underperform the market. We share the top 15 small-cap stocks favored by the best hedge fund managers every quarter and this strategy has managed to outperform the S&P 500 every year since it was launched in August 2012, returning over 142% and beating the market by more than 82 percentage points (read the details). Because of this, we know that collective hedge fund sentiment is extremely telling and valuable.
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