Hedge Funds Aren’t Crazy About Casa Systems, Inc. (CASA) Anymore

Hedge funds and other investment firms run by legendary investors like Israel Englander, Jeffrey Talpins and Ray Dalio are entrusted to manage billions of dollars of accredited investors’ money because they are without peer in the resources they use to identify the best investments for their chosen investment horizon. Moreover, they are more willing to invest a greater amount of their resources in small-cap stocks than big brokerage houses, and this is often where they generate their outperformance, which is why we pay particular attention to their best ideas in this space.

Casa Systems, Inc. (NASDAQ:CASA) has seen a decrease in enthusiasm from smart money in recent months. CASA was in 13 hedge funds’ portfolios at the end of the second quarter of 2019. There were 19 hedge funds in our database with CASA holdings at the end of the previous quarter. Our calculations also showed that CASA isn’t among the 30 most popular stocks among hedge funds (see the video below).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

At the moment there are several formulas market participants can use to size up publicly traded companies. A couple of the less utilized formulas are hedge fund and insider trading moves. We have shown that, historically, those who follow the best picks of the top fund managers can outclass their index-focused peers by a very impressive margin (see the details here).

John Overdeck of Two Sigma

Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We’re going to take a look at the fresh hedge fund action encompassing Casa Systems, Inc. (NASDAQ:CASA).

What have hedge funds been doing with Casa Systems, Inc. (NASDAQ:CASA)?

At Q2’s end, a total of 13 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -32% from the previous quarter. On the other hand, there were a total of 12 hedge funds with a bullish position in CASA a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

No of Hedge Funds with CASA Positions

The largest stake in Casa Systems, Inc. (NASDAQ:CASA) was held by AQR Capital Management, which reported holding $4.2 million worth of stock at the end of March. It was followed by D E Shaw with a $4.2 million position. Other investors bullish on the company included Renaissance Technologies, Arrowstreet Capital, and Two Sigma Advisors.

Judging by the fact that Casa Systems, Inc. (NASDAQ:CASA) has witnessed a decline in interest from the entirety of the hedge funds we track, it’s easy to see that there is a sect of hedge funds that elected to cut their positions entirely last quarter. Interestingly, Andrew Feldstein and Stephen Siderow’s Blue Mountain Capital sold off the largest stake of the 750 funds watched by Insider Monkey, totaling about $0.7 million in stock, and Israel Englander’s Millennium Management was right behind this move, as the fund said goodbye to about $0.5 million worth. These bearish behaviors are important to note, as total hedge fund interest dropped by 6 funds last quarter.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Casa Systems, Inc. (NASDAQ:CASA) but similarly valued. These stocks are EZCORP Inc (NASDAQ:EZPW), Infinera Corporation (NASDAQ:INFN), Puxin Limited (NYSE:NEW), and Mercantile Bank Corporation (NASDAQ:MBWM). This group of stocks’ market caps match CASA’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
EZPW 21 121607 1
INFN 11 89333 -8
NEW 3 4686 1
MBWM 7 28326 0
Average 10.5 60988 -1.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 10.5 hedge funds with bullish positions and the average amount invested in these stocks was $61 million. That figure was $21 million in CASA’s case. EZCORP Inc (NASDAQ:EZPW) is the most popular stock in this table. On the other hand Puxin Limited (NYSE:NEW) is the least popular one with only 3 bullish hedge fund positions. Casa Systems, Inc. (NASDAQ:CASA) 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 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Hedge funds were also right about betting on CASA as the stock returned 22.2% during the third quarter and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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