There are several ways to beat the market, and investing in small cap stocks has historically been one of them. We like to improve the odds of beating the market further by examining what famous hedge fund operators such as Carl Icahn and George Soros think. Those hedge fund operators make billions of dollars each year by hiring the best and the brightest to do research on stocks, including small cap stocks that big brokerage houses simply don’t cover. Because of Carl Icahn and other successful funds’ exemplary historical records, we pay attention to their small cap picks. In this article, we use hedge fund filing data to analyze ModusLink Global Solutions, Inc. (NASDAQ:MLNK).
ModusLink Global Solutions, Inc. (NASDAQ:MLNK) investors should pay attention to a decrease in enthusiasm from smart money recently. There were 8 hedge funds in our database with MLNK holdings at the end of the second quarter, which fell by 2 by the end of the third quarter. At the end of this article we will also compare MLNK to other stocks including Intrepid Potash, Inc. (NYSE:IPI), Richardson Electronics, Ltd. (NASDAQ:RELL), and Recro Pharma Inc (NASDAQ:REPH) to get a better sense of its popularity.
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We follow over 700 hedge funds and other institutional investors and by analyzing their quarterly 13F filings, we identify stocks that they are collectively bullish on and develop investment strategies based on this data. One strategy that outperformed the market over the last year involves selecting the 100 best-performing funds and identifying the 30 mid-cap stocks that they are collectively most bullish on. Over the past year, this strategy generated returns of 18%, topping the 8% gain registered by S&P 500 ETFs. We launched this strategy 2.5 years ago and it returned more than 39% since then, vs. 22% gain registered by the S&P 500 ETFs.
Hedge fund activity in ModusLink Global Solutions, Inc. (NASDAQ:MLNK)
At the end of the third quarter, a total of 6 of the hedge funds tracked by Insider Monkey were long this stock, a 25% fall from one quarter earlier. The graph below displays the number of hedge funds with bullish positions in MLNK over the last 5 quarters, which has steadily declined. So, let’s check out 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, Steel Partners, led by Warren Lichtenstein, holds the most valuable position in ModusLink Global Solutions, Inc. (NASDAQ:MLNK). Steel Partners has a $27 million position in the stock, comprising 8.3% of its 13F portfolio. On Steel Partners’ heels is Jim Simons’ Renaissance Technologies, with a $2.4 million position. Other members of the smart money that hold long positions encompass Mario Gabelli’s GAMCO Investors, Millennium Management, one of the 10 largest hedge funds in the world, and John Overdeck and David Siegel’s Two Sigma Advisors. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds, which is based on the performance of their 13F long positions in non-micro-cap stocks.
Now that we’ve mentioned the most bullish investors, let’s also take a look at some funds that said goodbye to their entire stakes in the stock during the third quarter. It’s worth mentioning that Joel Greenblatt’s Gotham Asset Management said goodbye to the biggest stake of the “upper crust” of funds studied by Insider Monkey, valued at close to $0.2 million in stock. Ben Levine, Andrew Manuel and Stefan Renold’s fund, LMR Partners, also dumped its small position in the stock.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as ModusLink Global Solutions, Inc. (NASDAQ:MLNK) but similarly valued. These stocks are Intrepid Potash, Inc. (NYSE:IPI), Richardson Electronics, Ltd. (NASDAQ:RELL), Recro Pharma Inc (NASDAQ:REPH), and USA Truck, Inc. (NASDAQ:USAK). This group of stocks’ market valuations are closest to MLNK’s market valuation.
|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 6 hedge funds with bullish positions and the average amount invested in these stocks was $21 million. That figure was $31 million in MLNK’s case. Recro Pharma Inc (NASDAQ:REPH) is the most popular stock in this table. On the other hand Richardson Electronics, Ltd. (NASDAQ:RELL) is the least popular one with only 4 bullish hedge fund positions. ModusLink Global Solutions, Inc. (NASDAQ:MLNK) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard REPH might be a better candidate to consider taking a long position in.