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 InterNAP Network Services (NASDAQ:INAP).
InterNAP Network Services’ stock plunged by 34% between July and September, but the interest in the company from the funds we track was flat at the end of the quarter. This is usually a negative indicator. At the end of this article we will also compare INAP to other stocks, including Village Super Market, Inc. (NASDAQ:VLGEA), Independent Bank Corporation(MI) (NASDAQ:IBCP), and Paratek Pharmaceuticals Inc (NASDAQ:PRTK) to get a better sense of its popularity.
Today there are plenty of indicators shareholders use to analyze their holdings. A couple of the best indicators are hedge fund and insider trading activity. We have shown that, historically, those who follow the top picks of the elite money managers can outperform their index-focused peers by a very impressive amount (see the details here).
With all of this in mind, let’s go over the fresh action surrounding InterNAP Network Services (NASDAQ:INAP).
How have hedgies been trading InterNAP Network Services (NASDAQ:INAP)?
At the end of the third quarter, a total of 10 of the hedge funds tracked by Insider Monkey were long this stock. With the smart money’s capital changing hands, there exists an “upper tier” of key hedge fund managers who were boosting their stakes significantly (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Mario Gabelli’s GAMCO Investors has the number one position in InterNAP Network Services (NASDAQ:INAP), worth close to $43.8 million, corresponding to 0.3% of its total 13F portfolio. On GAMCO Investors’s heels is Lee Munder’s Lee Munder Capital Group, with a $24.3 million position; the fund has 0.5% of its 13F portfolio invested in the stock. Remaining hedge funds and institutional investors that are bullish include Michael Murphy and Daniel Donoghue’s Discovery Group, Jim Simons’ Renaissance Technologies, and Jim Tarantino and Chris Galvin’s Westerly Capital Management.
Seeing as InterNAP Network Services (NASDAQ:INAP) has experienced a declining sentiment from hedge fund managers, it’s safe to say that there lies a certain “tier” of funds that slashed their full holdings by the end of the third quarter. At the top of the heap, David Brown’s Hawk Ridge Management cut the largest stake of all the hedgies watched by Insider Monkey, worth an estimated $0.7 million in stock, and Israel Englander’s Millennium Management was right behind this move, as the fund dumped about $0.1 million worth. These transactions are intriguing to say the least, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as InterNAP Network Services (NASDAQ:INAP) but similarly valued. We will take a look at Village Super Market, Inc. (NASDAQ:VLGEA), Independent Bank Corporation(MI) (NASDAQ:IBCP), Paratek Pharmaceuticals Inc (NASDAQ:PRTK), and SunOpta, Inc. (USA) (NASDAQ:STKL). This group of stocks’ market values are closest to INAP’s market value.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
As you can see these stocks had an average of 12 hedge funds with bullish positions and the average amount invested in these stocks was $77 million. That figure was $101 million in INAP’s case. SunOpta, Inc. (USA) (NASDAQ:STKL) is the most popular stock in this table. On the other hand Village Super Market, Inc. (NASDAQ:VLGEA) is the least popular one with only 6 bullish hedge fund positions. InterNAP Network Services (NASDAQ:INAP) 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 STKL might be a better candidate to consider a long position.