“Since 2006, value stocks (IVE vs IVW) have underperformed 11 of the 13 calendar years and when they beat growth, it wasn’t by much. Cumulatively, through this week, it has been a 122% differential (up 52% for value vs up 174% for growth). This appears to be the longest and most severe drought for value investors since data collection began. It will go our way eventually as there are too many people paying far too much for today’s darlings, both public and private. Further, the ten-year yield of 2.5% (pre-tax) isn’t attractive nor is real estate. We believe the value part of the global equity market is the only place to earn solid risk adjusted returns and we believe those returns will be higher than normal,” said Vilas Fund in its Q1 investor letter. We aren’t sure whether value stocks outperform growth, but we follow hedge fund investor letters to understand where the markets and stocks might be going. That’s why we believe it would be worthwhile to take a look at the hedge fund sentiment on Fluent, Inc. (NASDAQ:FLNT) in order to identify whether reputable and successful top money managers continue to believe in its potential.
Fluent, Inc. (NASDAQ:FLNT) was in 9 hedge funds’ portfolios at the end of the first quarter of 2019. FLNT has seen an increase in activity from the world’s largest hedge funds recently. There were 5 hedge funds in our database with FLNT holdings at the end of the previous quarter. Our calculations also showed that flnt isn’t among the 30 most popular stocks among hedge funds.
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.
Cliff Asness of AQR Capital Management
We’re going to take a glance at the recent hedge fund action regarding Fluent, Inc. (NASDAQ:FLNT).
Hedge fund activity in Fluent, Inc. (NASDAQ:FLNT)
At Q1’s end, a total of 9 of the hedge funds tracked by Insider Monkey were long this stock, a change of 80% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in FLNT over the last 15 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, D E Shaw was the largest shareholder of Fluent, Inc. (NASDAQ:FLNT), with a stake worth $2.6 million reported as of the end of March. Trailing D E Shaw was Millennium Management, which amassed a stake valued at $2.1 million. AQR Capital Management, Citadel Investment Group, and Ellington were also very fond of the stock, giving the stock large weights in their portfolios.
With a general bullishness amongst the heavyweights, some big names were leading the bulls’ herd. AQR Capital Management, managed by Cliff Asness, established the biggest position in Fluent, Inc. (NASDAQ:FLNT). AQR Capital Management had $1.3 million invested in the company at the end of the quarter. Ken Griffin’s Citadel Investment Group also initiated a $0.3 million position during the quarter. The other funds with brand new FLNT positions are Mike Vranos’s Ellington, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, and Jim Simons’s Renaissance Technologies.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Fluent, Inc. (NASDAQ:FLNT) but similarly valued. We will take a look at Computer Programs & Systems, Inc. (NASDAQ:CPSI), Kaleido BioSciences, Inc. (NASDAQ:KLDO), OptiNose, Inc. (NASDAQ:OPTN), and Daqo New Energy Corp (NYSE:DQ). This group of stocks’ market valuations match FLNT’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CPSI | 18 | 45626 | 5 |
| KLDO | 6 | 17238 | 6 |
| OPTN | 3 | 6910 | -3 |
| DQ | 5 | 9512 | -6 |
| Average | 8 | 19822 | 0.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 8 hedge funds with bullish positions and the average amount invested in these stocks was $20 million. That figure was $7 million in FLNT’s case. Computer Programs & Systems, Inc. (NASDAQ:CPSI) is the most popular stock in this table. On the other hand OptiNose, Inc. (NASDAQ:OPTN) is the least popular one with only 3 bullish hedge fund positions. Fluent, Inc. (NASDAQ:FLNT) 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. Our calculations showed that top 20 most popular stocks among hedge funds returned 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. Unfortunately FLNT wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on FLNT were disappointed as the stock returned -3% during the same period 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 13 of these stocks already outperformed the market so far in Q2.
Disclosure: None. This article was originally published at Insider Monkey.
