Hedge funds run by legendary names like Nelson Peltz and David Tepper make billions of dollars a year for themselves and their super-rich accredited investors (you’ve got to have a minimum of $1 million liquid to invest in a hedge fund) by spending enormous resources on analyzing and uncovering data about small-cap stocks that the big brokerage houses don’t follow. Small caps are where they can generate significant out-performance. These stocks have been on a tear since the end of June, outperforming large-cap index funds by more than 10 percentage points. That’s why we pay special attention to hedge fund activity in these stocks.
Calamos Asset Management, Inc (NASDAQ:CLMS) was in 6 hedge funds’ portfolios at the end of September. CLMS has experienced a decrease in enthusiasm from smart money of late. There were 7 hedge funds in our database with CLMS positions at the end of the previous quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Castle Brands Inc (NYSEAMEX:ROX), Westfield Financial, Inc. (NASDAQ:WFD), and Radiant Logistics, Inc. (NYSEAMEX:RLGT) to gather more data points.
We care about hedge fund sentiment because historically hedge funds’ stock picks delivered strong risk adjusted returns. There are certain segments of the market where hedge funds’ stock picks performed much better than its benchmarks. For instance, the 30 most popular mid-cap stocks among the best performing hedge funds returned 18% over the last 12 months outpacing S&P 500 Index by more than 10 percentage points. We developed this strategy 2.5 years ago and started sharing its picks in our quarterly newsletter. It bested the S&P 500 Index ETFs by delivering a solid 39% vs. 22% gain for its benchmarks.
Now, let’s go over the fresh action regarding Calamos Asset Management, Inc (NASDAQ:CLMS).
How have hedgies been trading Calamos Asset Management, Inc (NASDAQ:CLMS)?
At the end of the third quarter, a total of 6 of the hedge funds tracked by Insider Monkey held long positions in this stock, a drop of 14% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in CLMS over the last 5 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
When looking at the institutional investors followed by Insider Monkey, Nathaniel August’s Mangrove Partners has the most valuable position in Calamos Asset Management, Inc (NASDAQ:CLMS), worth close to $8.3 million, accounting for 1.9% of its total 13F portfolio. Coming in second is Renaissance Technologies, one of the largest hedge funds in the world, which holds a $6.1 million position; less than 0.1% of its 13F portfolio is allocated to the company. Other hedge funds and institutional investors that are bullish consist of Mario Gabelli’s GAMCO Investors, D. E. Shaw’s D E Shaw and John Overdeck and David Siegel’s Two Sigma Advisors. We should note that Mangrove Partners is among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Springbok Capital. One hedge fund selling its entire position doesn’t always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don’t think this is the case here because none of the 700+ hedge funds tracked by Insider Monkey identified CLMS as a viable investment and initiated a position in the stock.
Let’s go over hedge fund activity in other stocks similar to Calamos Asset Management, Inc (NASDAQ:CLMS). These stocks are Castle Brands Inc (NYSEAMEX:ROX), Westfield Financial, Inc. (NASDAQ:WFD), Radiant Logistics, Inc. (NYSEAMEX:RLGT), and Aspen Aerogels Inc (NYSE:ASPN). This group of stocks’ market caps resemble CLMS’s market cap.
|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 5 hedge funds with bullish positions and the average amount invested in these stocks was $11 million. That figure was $17 million in CLMS’s case. Radiant Logistics, Inc. (NYSEAMEX:RLGT) is the most popular stock in this table. On the other hand Westfield Financial, Inc. (NASDAQ:WFD) is the least popular one with only 4 bullish hedge fund positions. Calamos Asset Management, Inc (NASDAQ:CLMS) 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 RLGT might be a better candidate to consider taking a long position in.