Investing in hedge funds can bring large profits, but it’s not for everybody, since hedge funds are available only for high-net-worth individuals. They generate significant returns for investors to justify their large fees and they allocate a lot of time and employ a complex analysis to determine the best stocks to invest in. A particularly interesting group of stocks that hedge funds like is the small-caps. The huge amount of capital does not allow hedge funds to invest a lot in small-caps, but our research showed that their most popular small-cap ideas are less efficiently priced and generate stronger returns than their large- and mega-cap picks and the broader market. That is why we follow the hedge fund activity in the small-cap space.
Hedge fund interest in Callidus Software Inc. (NASDAQ:CALD) shares was flat during the third quarter. This is usually a negative indicator. A total of 19 hedge funds were long the stock on September 30, same as on June 30. At the end of this article we will also compare CALD to other stocks including MaxLinear, Inc. (NYSE:MXL), China Lodging Group, Ltd (ADR) (NASDAQ:HTHT), and HudBay Minerals Inc Ord Shs (NYSE:HBM) to get a better sense of its popularity.
At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.
How are hedge funds trading Callidus Software Inc. (NASDAQ:CALD)?
At the end of the third quarter, a total of 19 of the hedge funds tracked by Insider Monkey were bullish on this stock, unchanged from the second quarter of 2016. Hedge fund ownership of CALD has stayed in a relatively narrow range throughout the past year. With hedge funds’ capital changing hands, there exists an “upper tier” of notable hedge fund managers who were upping their stakes considerably (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, RGM Capital, managed by Robert G. Moses, holds the biggest position in Callidus Software Inc. (NASDAQ:CALD). According to its latest 13F filing, the fund has a $35.2 million position in the stock, comprising 4% of its 13F portfolio. On RGM Capital’s heels is Jim Simons’ Renaissance Technologies, with a $26.9 million position. Remaining professional money managers that hold long positions contain George McCabe’s Portolan Capital Management, Paul Marshall and Ian Wace’s Marshall Wace LLP, and James Dinan’s York Capital Management.
Seeing as Callidus Software Inc. (NASDAQ:CALD) has experienced no change in sentiment from hedge fund managers, there were also a select few funds who were dropping their full holdings during the third quarter. Intriguingly, Richard Driehaus’ Driehaus Capital sold off the biggest investment of the 700 funds tracked by Insider Monkey, totaling close to $12.4 million in stock, and Eric Semler’s TCS Capital Management was right behind this move, as the fund sold off about $3 million worth of CALD shares. These bearish behaviors are important to note, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s now review hedge fund activity in other stocks similar to Callidus Software Inc. (NASDAQ:CALD). We will take a look at MaxLinear, Inc. (NYSE:MXL), China Lodging Group, Ltd (ADR) (NASDAQ:HTHT), HudBay Minerals Inc Ord Shs (NYSE:HBM), and Emergent Biosolutions Inc (NYSE:EBS). This group of stocks’ market valuations are closest to CALD’s market valuation.
|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 16 hedge funds with bullish positions and the average amount invested in these stocks was $128 million. That figure was $130 million in CALD’s case. MaxLinear, Inc. (NYSE:MXL) is the most popular stock in this table. On the other hand HudBay Minerals Inc Ord Shs (NYSE:HBM) is the least popular one with only 9 bullish hedge fund positions. Callidus Software Inc. (NASDAQ:CALD) 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 MXL might be a better candidate to consider a long position in.