Hedge funds are not perfect. They have their bad picks just like everyone else. Micron, a stock hedge funds have loved, lost 50% during the last 12 months ending in October 30. Although hedge funds are not perfect, their consensus picks do deliver solid returns, however. Our data show the top 30 S&P 500 stocks among hedge funds at the end of September 2014 yielded an average return of 9.5% in the same time period, vs. a gain of 5.2% for the S&P 500 Index. Because hedge funds have a lot of resources and their consensus picks do well, we pay attention to what they think. In this article, we analyze what the elite funds think of Tremor Video Inc (NYSE:TRMR).
Is Tremor Video Inc (NYSE:TRMR) the right investment to pursue these days? The best stock pickers are losing their confidence in the stock as it has declined by over 26% since the beginning of the year. Nevertheless, TRMR was in 7 hedge funds’ portfolios at the end of the third quarter of 2015 and we are going to take a closer look at how the funds have been trading the stock, based on data from the last round of 13F filings.
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 Trillium Therapeutics Inc. (NASDAQ:TRIL), RADCOM Ltd. (NASDAQ:RDCM), and Mast Therapeutics Inc (NYSEMKT:MSTX) to gather more data points.
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To most market participants, hedge funds are assumed to be unimportant, old financial vehicles of the past. While there are over 8000 funds trading today, Our experts look at the top tier of this club, approximately 700 funds. Most estimates calculate that this group of people have their hands on the majority of the smart money’s total asset base, and by following their best stock picks, Insider Monkey has spotted several investment strategies that have historically beaten the S&P 500 index. Insider Monkey’s small-cap hedge fund strategy outstripped the S&P 500 index by 12 percentage points a year for a decade in their back tests.
Keeping this in mind, we’re going to take a look at the key action encompassing Tremor Video Inc (NYSE:TRMR).
How are hedge funds trading Tremor Video Inc (NYSE:TRMR)?
At the end of the third quarter, a total of 7 of the hedge funds tracked by Insider Monkey were long this stock, a decline of 13% from the second quarter. With hedgies’ capital changing hands, there exists a select group of notable hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).
According to Insider Monkey’s database, Royce & Associates, managed by Chuck Royce, holds the most valuable position in Tremor Video Inc (NYSE:TRMR). Royce & Associates has a $3.1 million position in the stock, comprising less than 0.1%% of its 13F portfolio. Coming in second is Prescott Group Capital Management, led by Phil Frohlich, holding a $2 million position; 0.5% of its 13F portfolio is allocated to the company. Some other hedge funds and institutional investors with similar optimism consist of Spencer M. Waxman’s Shannon River Fund Management, Jim Simons’ Renaissance Technologies, and D. E. Shaw’s D E Shaw.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: LMR Partners. One hedge fund selling its entire position doesn’t always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don’t think this is the case in this case because none of the 700+ hedge funds tracked by Insider Monkey identified TRMR as a viable investment and initiated a position in the stock.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Tremor Video Inc (NYSE:TRMR) but similarly valued. These stocks are Trillium Therapeutics Inc. (NASDAQ:TRIL), RADCOM Ltd. (NASDAQ:RDCM), Mast Therapeutics Inc (NYSEMKT:MSTX), and Higher One Holdings, Inc (NYSE:ONE). This group of stocks’ market values are closest to TRMR’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| TRIL | 8 | 14983 | 1 |
| RDCM | 4 | 13912 | -1 |
| MSTX | 7 | 8108 | 0 |
| ONE | 14 | 15693 | -2 |
As you can see these stocks had an average of 8 hedge funds with bullish positions and the average amount invested in these stocks was $13 million, higher than the $8 million in TRMR’s case. Higher One Holdings, Inc (NYSE:ONE) is the most popular stock in this table, while RADCOM Ltd. (NASDAQ:RDCM) is the least popular one with only 4 bullish hedge fund positions. Tremor Video Inc (NYSE:TRMR) 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 ONE might be a better candidate to consider a long position.
