Hedge Funds Are Piling Into ChannelAdvisor Corp (ECOM)

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the second quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 5 years and analyze what the smart money thinks of ChannelAdvisor Corp (NYSE:ECOM) based on that data and determine whether they were really smart about the stock.

Is ChannelAdvisor Corp (NYSE:ECOM) the right investment to pursue these days? Investors who are in the know were getting more optimistic. The number of bullish hedge fund positions advanced by 8 lately. ChannelAdvisor Corp (NYSE:ECOM) was in 19 hedge funds’ portfolios at the end of the second quarter of 2020. The all time high for this statistics is 14. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that ECOM isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 56 percentage points since March 2017 (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 34% through August 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

John Overdeck of Two Sigma

John Overdeck of Two Sigma Advisors

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we are checking out this junior gold mining stock and we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website to get excerpts of these letters in your inbox. With all of this in mind we’re going to go over the recent hedge fund action encompassing ChannelAdvisor Corp (NYSE:ECOM).

What does smart money think about ChannelAdvisor Corp (NYSE:ECOM)?

At the end of June, a total of 19 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 73% from one quarter earlier. On the other hand, there were a total of 14 hedge funds with a bullish position in ECOM a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Renaissance Technologies was the largest shareholder of ChannelAdvisor Corp (NYSE:ECOM), with a stake worth $10.4 million reported as of the end of September. Trailing Renaissance Technologies was Nokomis Capital, which amassed a stake valued at $9 million. D E Shaw, Arrowstreet Capital, and Two Sigma Advisors were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Nokomis Capital allocated the biggest weight to ChannelAdvisor Corp (NYSE:ECOM), around 4.12% of its 13F portfolio. Altai Capital is also relatively very bullish on the stock, setting aside 0.69 percent of its 13F equity portfolio to ECOM.

With a general bullishness amongst the heavyweights, some big names have jumped into ChannelAdvisor Corp (NYSE:ECOM) headfirst. Nokomis Capital, managed by Brett Hendrickson, created the most outsized position in ChannelAdvisor Corp (NYSE:ECOM). Nokomis Capital had $9 million invested in the company at the end of the quarter. Josh Goldberg’s G2 Investment Partners Management also initiated a $2.2 million position during the quarter. The other funds with new positions in the stock are Noam Gottesman’s GLG Partners, Peter Muller’s PDT Partners, and Michael Gelband’s ExodusPoint Capital.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as ChannelAdvisor Corp (NYSE:ECOM) but similarly valued. These stocks are Puxin Limited (NYSE:NEW), Textainer Group Holdings Limited (NYSE:TGH), Pitney Bowes Inc. (NYSE:PBI), Cowen Inc. (NASDAQ:COWN), Heritage Commerce Corp. (NASDAQ:HTBK), Meet Group Inc (NYSE:MEET), and AMC Entertainment Holdings Inc (NYSE:AMC). This group of stocks’ market values are similar to ECOM’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
NEW 8 7400 0
TGH 9 11206 -2
PBI 11 35903 -4
COWN 18 99103 0
HTBK 11 17079 2
MEET 19 68109 -2
AMC 8 1307 -6
Average 12 34301 -1.7

View table here if you experience formatting issues.

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 $34 million. That figure was $51 million in ECOM’s case. Meet Group Inc (NYSE:MEET) is the most popular stock in this table. On the other hand Puxin Limited (NYSE:NEW) is the least popular one with only 8 bullish hedge fund positions. ChannelAdvisor Corp (NYSE:ECOM) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for ECOM is 90. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 24.8% in 2020 through the end of September and beat the market by 19.3 percentage points. Unfortunately ECOM wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on ECOM were disappointed as the stock returned -8.6% in Q3 and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.

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