The elite funds run by legendary investors such as David Tepper and Dan Loeb make hundreds of millions of dollars for themselves and their investors by spending enormous resources doing research on small cap stocks that big investment banks don’t follow. Because of their pay structures, they have strong incentives to do the research necessary to beat the market. That’s why we pay close attention to what they think in small cap stocks. In this article, we take a closer look at Brightcove Inc (NASDAQ:BCOV) from the perspective of those elite funds.
Brightcove Inc (NASDAQ:BCOV) has experienced an increase in hedge fund interest in recent months. Our calculations also showed that BCOV isn’t among the 30 most popular stocks among hedge funds (see the video below).
Video: Click the image to 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 has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
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 review the fresh hedge fund action encompassing Brightcove Inc (NASDAQ:BCOV).
How have hedgies been trading Brightcove Inc (NASDAQ:BCOV)?
At Q2’s end, a total of 18 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 20% from the first quarter of 2019. The graph below displays the number of hedge funds with bullish position in BCOV over the last 16 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists an “upper tier” of noteworthy hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, Douglas T. Granat’s Trigran Investments has the most valuable position in Brightcove Inc (NASDAQ:BCOV), worth close to $36.1 million, corresponding to 6% of its total 13F portfolio. Sitting at the No. 2 spot is Tenzing Global Investors, led by Chet Kapoor, holding a $30.5 million position; 16.2% of its 13F portfolio is allocated to the stock. Other professional money managers that hold long positions contain Constantinos J. Christofilis’s Archon Capital Management, Renaissance Technologies and David Brown’s Hawk Ridge Management.
As one would reasonably expect, some big names were leading the bulls’ herd. Millennium Management, managed by Israel Englander, initiated the most outsized position in Brightcove Inc (NASDAQ:BCOV). Millennium Management had $1.8 million invested in the company at the end of the quarter. David Park’s Headlands Capital also made a $1 million investment in the stock during the quarter. The only other fund with a brand new BCOV position is Minhua Zhang’s Weld Capital Management.
Let’s check out hedge fund activity in other stocks similar to Brightcove Inc (NASDAQ:BCOV). We will take a look at Unity Biotechnology, Inc. (NASDAQ:UBX), Cambridge Bancorp (NASDAQ:CATC), Nam Tai Property Inc (NYSE:NTP), and RBB Bancorp (NASDAQ:RBB). This group of stocks’ market valuations are similar to BCOV’s market valuation.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 5.5 hedge funds with bullish positions and the average amount invested in these stocks was $27 million. That figure was $142 million in BCOV’s case. Nam Tai Property Inc (NYSE:NTP) is the most popular stock in this table. On the other hand Unity Biotechnology, Inc. (NASDAQ:UBX) is the least popular one with only 5 bullish hedge fund positions. Compared to these stocks Brightcove Inc (NASDAQ:BCOV) is more popular among hedge funds. 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. Unfortunately BCOV wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on BCOV were disappointed as the stock returned 1.5% during the third quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market in Q3.
Disclosure: None. This article was originally published at Insider Monkey.