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Is Easterly Acquisition Corp (EACQ) Going to Burn These Hedge Funds?

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You probably know from experience that there is not as much information on small-cap companies as there is on large companies. Of course, this makes it really hard and difficult for individual investors to make proper and accurate analysis of certain small-cap companies. However, well-known and successful hedge fund investors like Carl Icahn and George Soros hold the necessary resources and abilities to conduct an extensive stock analysis on small-cap stocks, which enable them to make millions of dollars by identifying potential winners within the small-cap galaxy of stocks. This represents the main reason why Insider Monkey takes notice of the hedge fund activity in these overlooked stocks.

Hedge fund interest in Easterly Acquisition Corp (NASDAQ:EACQ) shares was flat at the end of last quarter. This is usually a negative indicator. 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 Hovnanian Enterprises, Inc. (NYSE:HOV), Trinity Place Holdings Inc. (NYSEMKT:TPHS), and BankFinancial Corporation (NASDAQ:BFIN) to gather more data points.

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We care about hedge fund sentiment because historically hedge funds’ stock picks delivered strong risk adjusted returns. There are certain segments of the market where hedge funds’ stock picks performed much better than its benchmarks. For instance, the 30 most popular mid-cap stocks among the best performing hedge funds returned 18% over the last 12 months outpacing S&P 500 Index by more than 10 percentage points. We developed this strategy 2.5 years ago and started sharing its picks in our quarterly newsletter. It bested the S&P 500 Index ETFs by delivering a solid 39% vs. 22% gain for its benchmarks.

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Keeping this in mind, we’re going to take a look at the recent action surrounding Easterly Acquisition Corp (NASDAQ:EACQ).

How have hedgies been trading Easterly Acquisition Corp (NASDAQ:EACQ)?

Heading into the fourth quarter of 2016, a total of 11 of the hedge funds tracked by Insider Monkey were bullish on this stock, flat from the second quarter of 2016. The graph below displays the number of hedge funds with bullish position in EACQ over the last 5 quarters. With hedgies’ capital changing hands, there exists a select group of notable hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).

EACQ Chart

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey,  Fir Tree, founded by Jeffrey Tannenbaum, has the largest position in Easterly Acquisition Corp (NASDAQ:EACQ), worth close to $18.4 million, accounting for 0.8% of its total 13F portfolio. The second largest stake is held by Alyeska Investment Group, led by Anand Parekh, holding a $15.1 million position; 0.2% of its 13F portfolio is allocated to the stock. Remaining peers with similar optimism include Louis Bacon’s Moore Global Investments, Nick Niell’s Arrowgrass Capital Partners and Neil Chriss’ Hutchin Hill Capital. 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.

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