At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards QuinStreet Inc (NASDAQ:QNST).
Is QNST a good stock to buy now? QuinStreet Inc (NASDAQ:QNST) has experienced a decrease in hedge fund sentiment in recent months. QuinStreet Inc (NASDAQ:QNST) was in 16 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistic is 28. Our calculations also showed that QNST 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 15 best blue chip stocks to pick the best large-cap stocks to buy. 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. Keeping this in mind we’re going to take a gander at the new hedge fund action regarding QuinStreet Inc (NASDAQ:QNST).
Do Hedge Funds Think QNST Is A Good Stock To Buy Now?
Heading into the fourth quarter of 2020, a total of 16 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -20% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards QNST over the last 21 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in QuinStreet Inc (NASDAQ:QNST) was held by Private Capital Management, which reported holding $46.5 million worth of stock at the end of September. It was followed by Rubric Capital Management with a $44.6 million position. Other investors bullish on the company included Portolan Capital Management, Royce & Associates, and Renaissance Technologies. In terms of the portfolio weights assigned to each position Private Capital Management allocated the biggest weight to QuinStreet Inc (NASDAQ:QNST), around 10.64% of its 13F portfolio. Rubric Capital Management is also relatively very bullish on the stock, designating 4.16 percent of its 13F equity portfolio to QNST.
Judging by the fact that QuinStreet Inc (NASDAQ:QNST) has experienced a decline in interest from hedge fund managers, we can see that there were a few funds that decided to sell off their positions entirely last quarter. It’s worth mentioning that David Harding’s Winton Capital Management dumped the biggest investment of the “upper crust” of funds tracked by Insider Monkey, comprising about $1.5 million in stock. Travis Cocke’s fund, Voss Capital, also cut its stock, about $0.5 million worth. These moves are important to note, as aggregate hedge fund interest dropped by 4 funds last quarter.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as QuinStreet Inc (NASDAQ:QNST) but similarly valued. We will take a look at Acutus Medical, Inc. (NASDAQ:AFIB), QAD Inc. (NASDAQ:QADA), OceanFirst Financial Corp. (NASDAQ:OCFC), Johnson Outdoors Inc. (NASDAQ:JOUT), Granite Construction Incorporated (NYSE:GVA), Archrock, Inc. (NYSE:AROC), and Delek US Holdings, Inc. (NYSE:DK). This group of stocks’ market values are similar to QNST’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 13.9 hedge funds with bullish positions and the average amount invested in these stocks was $117 million. That figure was $174 million in QNST’s case. Acutus Medical, Inc. (NASDAQ:AFIB) is the most popular stock in this table. On the other hand Archrock, Inc. (NYSE:AROC) is the least popular one with only 10 bullish hedge fund positions. QuinStreet Inc (NASDAQ:QNST) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for QNST is 68.1. 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 30.7% in 2020 through December 14th and still beat the market by 15.8 percentage points. Hedge funds were also right about betting on QNST as the stock returned 30.7% since the end of Q3 (through 12/14) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.