Between June 25 and October 30th the Russell 2000 ETF (IWM) lagged the larger S&P 500 ETF (SPY) by more than 14 percentage points as investors worried over the possible ramifications of rising interest rates. The hedge funds and institutional investors we track typically invest more in smaller-cap stocks than an average investor, and we have seen data that shows those funds paring back their overall exposure. Those funds cutting positions in small-caps is one reason why volatility has increased. In the following paragraphs, we take a closer look at what hedge funds and prominent investors think of Zagg Inc (NASDAQ:ZAGG) and see how the stock is affected by the recent hedge fund activity.
Zagg Inc (NASDAQ:ZAGG) is a small-cap producers of accessories for mobile devices. The stock has surged by more than 60% since the beginning of the year, but it lost 13% in the third quarter and hedge fund interest in Zagg Inc (NASDAQ:ZAGG) shares was flat at the end of September. 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 Regional Management Corp (NYSE:RM), Rocket Fuel Inc (NASDAQ:FUEL), and Heska Corp (NASDAQ:HSKA) to gather more data points.
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In the eyes of most stock holders, hedge funds are viewed as slow, outdated financial vehicles of yesteryear. While there are more than 8000 funds in operation at the moment, We hone in on the moguls of this club, approximately 700 funds. Most estimates calculate that this group of people manage the lion’s share of the hedge fund industry’s total capital, and by tailing their best stock picks, Insider Monkey has come up with numerous investment strategies that have historically outstripped the S&P 500 index. Insider Monkey’s small-cap hedge fund strategy exceeded the S&P 500 index by 12 percentage points a year for a decade in their back tests.
With all of this in mind, we’re going to analyze the key action surrounding Zagg Inc (NASDAQ:ZAGG).
What does the smart money think about Zagg Inc (NASDAQ:ZAGG)?
Heading into Q4, a total of 14 of the hedge funds tracked by Insider Monkey held long positions in this stock. Among these funds, Chuck Royce’s Royce & Associates has the largest position in Zagg Inc (NASDAQ:ZAGG), worth close to $5.2 million, corresponding to less than 0.1%% of its total 13F portfolio. On Royce & Associates’s heels is Cliff Asness’ AQR Capital Management, with an $4 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Other professional money managers that are bullish encompass Jim Simons’s Renaissance Technologies, Peter Algert and Kevin Coldiron’s Algert Coldiron Investors, and Israel Englander’s Millennium Management.
In addition, there lies a certain “tier” of money managers that elected to cut their positions entirely last quarter. It’s worth mentioning that Chao Ku’s Nine Chapters Capital Management dumped the biggest position of all the hedgies watched by Insider Monkey, comprising about $0.9 million in stock, and Ken Gray and Steve Walsh’s Bryn Mawr Capital was right behind this move, as the fund cut about $0.1 million worth of shares.
Let’s now review hedge fund activity in other stocks similar to Zagg Inc (NASDAQ:ZAGG). We will take a look at Regional Management Corp (NYSE:RM), Rocket Fuel Inc (NASDAQ:FUEL), Heska Corp (NASDAQ:HSKA), and Neuberger Berman High Yield Strateges Fd (NYSEMKT:NHS). All of these stocks’ market caps are similar to ZAGG’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| RM | 18 | 70063 | 1 |
| FUEL | 10 | 9885 | 1 |
| HSKA | 9 | 27219 | 1 |
| NHS | 5 | 21953 | 1 |
As you can see these stocks had an average of 11 hedge funds with bullish positions and the average amount invested in these stocks was $32 million, compared to $21 million in ZAGG’s case. Regional Management Corp (NYSE:RM) is the most popular stock in this table. On the other hand Neuberger Berman High Yield Strateges Fd (NYSEMKT:NHS) is the least popular one with only 5 bullish hedge fund positions. Zagg Inc (NASDAQ:ZAGG) is not the most popular stock in this group, but hedge fund interest is still above average. This is a slightly positive signal, but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard RM might be a better candidate to consider a long position.
