Reputable billionaire investors such as Nelson Peltz and David Tepper generate exorbitant profits for their wealthy accredited investors (a minimum of $1 million in investable assets would be required to invest in a hedge fund and most successful hedge funds won’t accept your savings unless you commit at least $5 million) by pinpointing winning small-cap stocks. There is little or no publicly-available information at all on some of these small companies, which makes it hard for an individual investor to pin down a winner within the small-cap space. However, hedge funds and other big asset managers can do the due diligence and analysis for you instead, thanks to their highly-skilled research teams and vast resources to conduct an appropriate evaluation process. Looking for potential winners within the small-cap galaxy of stocks? We believe following the smart money is a good starting point.
IMPAC Mortgage Holdings, Inc (NYSE:IMH) has seen an increase in support from the world’s most successful money managers in recent months. There were just 2 hedge funds in our database with IMH holdings at the end of the second quarter, which rose to 9 by the end of the third 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 Build-A-Bear Workshop, Inc (NYSE:BBW), Credit Suisse AM Inc Fund Inc. (NYSEMKT:CIK), and Everi Holdings Inc (NYSE:EVRI) to gather more data points.
At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.
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Hedge fund activity in IMPAC Mortgage Holdings, Inc (NYSE:IMH)
At the end of the third quarter, a total of 9 of the hedge funds tracked by Insider Monkey were long this stock, a greater than 200% increase from one quarter earlier, as smart money suddenly takes a much keener interest in the stock. With hedgies’ sentiment swirling, there exists an “upper tier” of key hedge fund managers who were increasing their holdings significantly (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, Emanuel J. Friedman of EJF Capital holds the largest position in IMPAC Mortgage Holdings, Inc (NYSE:IMH). EJF Capital has a $2 million position in the stock. On EJF Capital’s heels is Alec Litowitz and Ross Laser of Magnetar Capital, with a $0.9 million position. Some other professional money managers that are bullish include Brian Taylor’s Pine River Capital Management, Renaissance Technologies, one of the largest hedge funds in the world, and Joe DiMenna’s ZWEIG DIMENNA PARTNERS. 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-micro-cap stocks.