Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that’s why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to smartest analysts and expensive data/information sources that individual investors can’t match. So should one consider investing in HyreCar Inc. (NASDAQ:HYRE)? The smart money sentiment can provide an answer to this question.
Is HYRE a good stock to buy now? HyreCar Inc. (NASDAQ:HYRE) investors should be aware of an increase in enthusiasm from smart money in recent months. HyreCar Inc. (NASDAQ:HYRE) was in 8 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistics is 7. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that HYRE isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 S&P 500 ETFs by more than 66 percentage points since March 2017 (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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 5 best cheap stocks to buy according to Ray Dalio to identify stocks with upside potential. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. With all of this in mind let’s analyze the key hedge fund action regarding HyreCar Inc. (NASDAQ:HYRE).
What have hedge funds been doing with HyreCar Inc. (NASDAQ:HYRE)?
At third quarter’s end, a total of 8 of the hedge funds tracked by Insider Monkey were long this stock, a change of 33% from the second quarter of 2020. The graph below displays the number of hedge funds with bullish position in HYRE over the last 21 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in HyreCar Inc. (NASDAQ:HYRE) was held by Lynrock Lake, which reported holding $5.3 million worth of stock at the end of September. It was followed by G2 Investment Partners Management with a $3.4 million position. Other investors bullish on the company included Invenomic Capital Management, Portolan Capital Management, and Renaissance Technologies. In terms of the portfolio weights assigned to each position G2 Investment Partners Management allocated the biggest weight to HyreCar Inc. (NASDAQ:HYRE), around 0.83% of its 13F portfolio. Invenomic Capital Management is also relatively very bullish on the stock, earmarking 0.46 percent of its 13F equity portfolio to HYRE.
Consequently, some big names have jumped into HyreCar Inc. (NASDAQ:HYRE) headfirst. Royce & Associates, managed by Chuck Royce, initiated the most outsized position in HyreCar Inc. (NASDAQ:HYRE). Royce & Associates had $0.1 million invested in the company at the end of the quarter. Greg Eisner’s Engineers Gate Manager also made a $0 million investment in the stock during the quarter. The only other fund with a brand new HYRE position is David Nguyen and Nancy Oh’s One68 Global Capital.
Let’s now review hedge fund activity in other stocks similar to HyreCar Inc. (NASDAQ:HYRE). These stocks are Aqua Metals, Inc. (NASDAQ:AQMS), Richardson Electronics, Ltd. (NASDAQ:RELL), CohBar, Inc. (NASDAQ:CWBR), Red Lion Hotels Corporation (NYSE:RLH), Community First Bancshares, Inc. (NASDAQ:CFBI), Diffusion Pharmaceuticals Inc. (NASDAQ:DFFN), and CollPlant Biotechnologies Ltd. (NASDAQ:CLGN). This group of stocks’ market values are closest to HYRE’s market value.
|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 3.4 hedge funds with bullish positions and the average amount invested in these stocks was $6 million. That figure was $11 million in HYRE’s case. Red Lion Hotels Corporation (NYSE:RLH) is the most popular stock in this table. On the other hand Community First Bancshares, Inc. (NASDAQ:CFBI) is the least popular one with only 1 bullish hedge fund positions. HyreCar Inc. (NASDAQ:HYRE) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for HYRE is 80.8. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 31.6% in 2020 through December 2nd and still beat the market by 16 percentage points. Hedge funds were also right about betting on HYRE as the stock returned 121.6% since the end of Q3 (through 12/2) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.