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Did Hedge Funds Drop The Ball On USA Technologies, Inc. (USAT) ?

The 700+ hedge funds and famous money managers tracked by Insider Monkey have already compiled and submitted their 13F filings for the first quarter, which unveil their equity positions as of March 31. We went through these filings, fixed typos and other more significant errors and identified the changes in hedge fund portfolios. Our extensive review of these public filings is finally over, so this article is set to reveal the smart money sentiment towards USA Technologies, Inc. (NASDAQ:USAT).

Is USA Technologies, Inc. (NASDAQ:USAT) an attractive investment right now? Investors who are in the know are becoming less confident. The number of bullish hedge fund positions were cut by 4 in recent months. Our calculations also showed that USAT isn’t among the 30 most popular stocks among hedge funds. USAT was in 14 hedge funds’ portfolios at the end of the first quarter of 2019. There were 18 hedge funds in our database with USAT holdings at the end of the previous quarter.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 30.9% through May 30, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Philip Hempleman Ardsley Partners

We’re going to analyze the latest hedge fund action regarding USA Technologies, Inc. (NASDAQ:USAT).

What does smart money think about USA Technologies, Inc. (NASDAQ:USAT)?

At the end of the first quarter, a total of 14 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -22% from one quarter earlier. On the other hand, there were a total of 12 hedge funds with a bullish position in USAT a year ago. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were upping their stakes considerably (or already accumulated large positions).

USAT_jun2019

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Ardsley Partners, managed by Philip Hempleman, holds the largest position in USA Technologies, Inc. (NASDAQ:USAT). Ardsley Partners has a $17.7 million position in the stock, comprising 3.4% of its 13F portfolio. The second most bullish fund manager is G2 Investment Partners Management, managed by Josh Goldberg, which holds a $9.3 million position; the fund has 2.9% of its 13F portfolio invested in the stock. Other peers that are bullish comprise Himanshu Gulati’s Antara Capital, Thomas Ellis and Todd Hammer’s North Run Capital and Spencer M. Waxman’s Shannon River Fund Management.

Judging by the fact that USA Technologies, Inc. (NASDAQ:USAT) has experienced a decline in interest from the aggregate hedge fund industry, logic holds that there is a sect of fund managers that decided to sell off their entire stakes last quarter. It’s worth mentioning that Jim Simons’s Renaissance Technologies sold off the largest investment of all the hedgies monitored by Insider Monkey, totaling close to $4.3 million in call options. Himanshu Gulati’s fund, Antara Capital, also said goodbye to its call options, about $1.2 million worth. These transactions are interesting, as aggregate hedge fund interest was cut by 4 funds last quarter.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as USA Technologies, Inc. (NASDAQ:USAT) but similarly valued. These stocks are Compugen Ltd. (NASDAQ:CGEN), Monroe Capital Corp (NASDAQ:MRCC), ACM Research, Inc. (NASDAQ:ACMR), and Aldeyra Therapeutics Inc (NASDAQ:ALDX). This group of stocks’ market caps are closest to USAT’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CGEN 3 6532 -1
MRCC 4 2895 1
ACMR 2 181 2
ALDX 16 70394 1
Average 6.25 20001 0.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 6.25 hedge funds with bullish positions and the average amount invested in these stocks was $20 million. That figure was $44 million in USAT’s case. Aldeyra Therapeutics Inc (NASDAQ:ALDX) is the most popular stock in this table. On the other hand ACM Research, Inc. (NASDAQ:ACMR) is the least popular one with only 2 bullish hedge fund positions. USA Technologies, Inc. (NASDAQ:USAT) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. Hedge funds were also right about betting on USAT as the stock returned 91.3% during the same period and outperformed the market by an even larger margin. Hedge funds were rewarded for their relative bullishness.

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

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