Did Hedge Funds Drop The Ball On Quotient Technology Inc (QUOT) ?

Is Quotient Technology Inc (NYSE:QUOT) a good investment right now? We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.

Quotient Technology Inc (NYSE:QUOT) shareholders have witnessed an increase in activity from the world’s largest hedge funds recently. QUOT was in 17 hedge funds’ portfolios at the end of the third quarter of 2019. There were 13 hedge funds in our database with QUOT holdings at the end of the previous quarter. Our calculations also showed that QUOT isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.

Bill Miller

Bill Miller of Miller Value Partners

We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds‘ buy/sell signals. We’re going to review the new hedge fund action surrounding Quotient Technology Inc (NYSE:QUOT).

How are hedge funds trading Quotient Technology Inc (NYSE:QUOT)?

Heading into the fourth quarter of 2019, a total of 17 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 31% from one quarter earlier. By comparison, 13 hedge funds held shares or bullish call options in QUOT a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

When looking at the institutional investors followed by Insider Monkey, Cynthia Paul’s Lynrock Lake has the most valuable position in Quotient Technology Inc (NYSE:QUOT), worth close to $81.4 million, amounting to 10.4% of its total 13F portfolio. The second most bullish fund manager is Bill Miller of Miller Value Partners, with a $57.3 million position; 2.3% of its 13F portfolio is allocated to the stock. Some other peers that hold long positions encompass Richard Mashaal’s Rima Senvest Management, Douglas T. Granat’s Trigran Investments and Claus Moller’s P2 Capital Partners. In terms of the portfolio weights assigned to each position Lynrock Lake allocated the biggest weight to Quotient Technology Inc (NYSE:QUOT), around 10.41% of its 13F portfolio. Trigran Investments is also relatively very bullish on the stock, designating 4.32 percent of its 13F equity portfolio to QUOT.

As aggregate interest increased, key hedge funds were breaking ground themselves. Citadel Investment Group, managed by Ken Griffin, established the biggest position in Quotient Technology Inc (NYSE:QUOT). Citadel Investment Group had $1.6 million invested in the company at the end of the quarter. Paul Tudor Jones’s Tudor Investment Corp also initiated a $0.8 million position during the quarter. The following funds were also among the new QUOT investors: David Harding’s Winton Capital Management, Donald Sussman’s Paloma Partners, and Minhua Zhang’s Weld Capital Management.

Let’s check out hedge fund activity in other stocks similar to Quotient Technology Inc (NYSE:QUOT). These stocks are Puxin Limited (NYSE:NEW), Cooper-Standard Holdings Inc (NYSE:CPS), Kimbell Royalty Partners (NYSE:KRP), and AngioDynamics, Inc. (NASDAQ:ANGO). This group of stocks’ market caps are closest to QUOT’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
NEW 5 7400 2
CPS 16 33640 1
KRP 5 15303 0
ANGO 15 34646 3
Average 10.25 22747 1.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 10.25 hedge funds with bullish positions and the average amount invested in these stocks was $23 million. That figure was $232 million in QUOT’s case. Cooper-Standard Holdings Inc (NYSE:CPS) is the most popular stock in this table. On the other hand Puxin Limited (NYSE:NEW) is the least popular one with only 5 bullish hedge fund positions. Compared to these stocks Quotient Technology Inc (NYSE:QUOT) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Hedge funds were also right about betting on QUOT as the stock returned 33.4% during the first two months of Q4 and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

Disclosure: None. This article was originally published at Insider Monkey.