Billionaire hedge fund managers such as Steve Cohen and Stan Druckenmiller can generate millions or even billions of dollars every year by pinning down high-potential small-cap stocks and pouring cash into these candidates. Small-cap stocks are overlooked by most investors, brokerage houses, and financial services hubs, while the unlimited research abilities of the big players within the hedge fund industry can easily identify the undervalued and high-potential stocks that reside the ignored corners of equity markets. There are numerous small-cap stocks that have turned out to be great winners, which is one of the main reasons the Insider Monkey team pays close attention to the hedge fund activity in relation to these stocks.
Stein Mart, Inc. (NASDAQ:SMRT) shares didn’t see a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 10 hedge funds’ portfolios at the end of the third quarter of 2016, same as at the end of the second quarter. At the end of this article we will also compare SMRT to other stocks including Glu Mobile Inc. (NASDAQ:GLUU), Consolidated-Tomoka Land Co. (NYSEAMEX:CTO), and Heritage-Crystal Clean, Inc. (NASDAQ:HCCI) to get a better sense of its popularity.
At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.
What does the smart money think about Stein Mart, Inc. (NASDAQ:SMRT)?
Heading into the fourth quarter of 2016, a total of 10 of the hedge funds tracked by Insider Monkey were bullish on this stock, unchanged from one quarter earlier. By comparison, 12 hedge funds held shares or bullish call options in SMRT heading into this year, which has dipped by 2 in 2016. With hedge funds’ capital changing hands, there exists a select group of notable hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Chuck Royce of Royce & Associates holds the number one position in Stein Mart, Inc. (NASDAQ:SMRT). Royce & Associates has a $33 million position in the stock. The second largest stake is held by D E Shaw, one of the biggest hedge funds in the world, holding a $1 million position. Some other peers that hold long positions include John Overdeck and David Siegel’s Two Sigma Advisors, Cliff Asness’ AQR Capital Management, and Ken Griffin’s Citadel Investment Group. 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-microcap stocks.
Now that we’ve mentioned the most bullish investors, let’s also take a look at some funds that got rid of their entire stakes in the stock during the third quarter. At the top of the heap, Neil Chriss’ Hutchin Hill Capital got rid of the largest position of all the investors followed by Insider Monkey, valued at about $0.3 million in stock, and Israel Englander’s Millennium Management was right behind this move, as the fund sold off about $0.2 million worth of shares.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Stein Mart, Inc. (NASDAQ:SMRT) but similarly valued. We will take a look at Glu Mobile Inc. (NASDAQ:GLUU), Consolidated-Tomoka Land Co. (NYSEAMEX:CTO), Heritage-Crystal Clean, Inc. (NASDAQ:HCCI), and Corbus Pharmaceuticals Holdings Inc (NASDAQ:CRBP). This group of stocks’ market valuations resemble SMRT’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 7 hedge funds with bullish positions and the average amount invested in these stocks was $64 million. That figure was $36 million in SMRT’s case. Glu Mobile Inc. (NASDAQ:GLUU) is the most popular stock in this table. On the other hand Corbus Pharmaceuticals Holdings Inc (NASDAQ:CRBP) is the least popular one with only 5 bullish hedge fund positions. Compared to these stocks Stein Mart, Inc. (NASDAQ:SMRT) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.