Hedge funds and other investment firms that we track manage billions of dollars of their wealthy clients’ money, and needless to say, they are painstakingly thorough when analyzing where to invest this money, as their own wealth depends on it. Regardless of the various methods used by elite investors like David Tepper and Dan Loeb, the resources they expend are second-to-none. This is especially valuable when it comes to small-cap stocks, which is where they generate their strongest outperformance, as their resources give them a huge edge when it comes to studying these stocks compared to the average investor, which is why we intently follow their activity in the small-cap space.
Is Novatel Wireless Inc (NASDAQ:MIFI) a buy, a sell, or a hold? Money managers are becoming less confident. The number of bullish hedge fund positions decreased by 1 in recent months. The level and the change in hedge fund popularity aren’t the only variables you need to analyze in order 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 Marin Software Inc (NYSE:MRIN), Morgans Hotel Group Co. (NASDAQ:MHGC), and Roundy’s Inc (NYSE:RNDY) to gather more data points.
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According to most stock holders, hedge funds are viewed as unimportant, old investment tools of yesteryear. While there are greater than 8,000 funds trading today, our researchers look at the bigwigs of this club, approximately 700 funds. Most estimates calculate that this group of people manage most of the hedge fund industry’s total asset base, and by tracking their highest performing stock picks, Insider Monkey has spotted a number of investment strategies that have historically defeated the market. Insider Monkey’s small-cap hedge fund strategy outrun the S&P 500 index by 12 percentage points annually for a decade in their back tests.
With all of this in mind, let’s analyze the recent action encompassing Novatel Wireless Inc (NASDAQ:MIFI).
How have hedgies been trading Novatel Wireless Inc (NASDAQ:MIFI)?
Heading into Q4, a total of 8 of the hedge funds tracked by Insider Monkey held long positions in this stock, a decline of 11% from one quarter earlier. With hedge funds’ positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Soros Fund Management, founded by George Soros, holds the most valuable position in Novatel Wireless Inc (NASDAQ:MIFI). The fund reportedly holds a $5.3 million position in the stock, comprising 0.1% of its 13F portfolio. Not far behind is Renaissance Technologies, with a $2.6 million position; the fund has less than 0.1% of its 13F portfolio invested in the stock. Other members of the smart money community that are bullish on Novatel Wireless consist of Phil Frohlich’s Prescott Group Capital Management, Cliff Asness’ AQR Capital Management, and Matthew Hulsizer’s PEAK6 Capital Management.
Due to the fact that Novatel Wireless Inc (NASDAQ:MIFI) has witnessed bearish sentiment from the hedge fund industry, we can see that there exists a select few hedge funds who were dropping their positions entirely last quarter. Among them, Israel Englander’s Millennium Management unloaded some $500,000 worth of shares of Novatel Wireless. In an earlier version of the article we reported that DG Capital also dumped its $13 million equity stake in the company. We noticed DG Capital erroneously reported their convertible debt position as an equity position. A spokesman for Novatel Wireless told us that they reached out to DG Capital and verified that the fund didn’t sell its convertible debt position; DG Capital just didn’t report the position in the latest round of 13F filings.
Let’s go over hedge fund activity in other stocks similar to Novatel Wireless Inc (NASDAQ:MIFI). These stocks are Marin Software Inc (NYSE:MRIN), Morgans Hotel Group Co. (NASDAQ:MHGC), Roundy’s Inc (NYSE:RNDY), and Cherry Hill Mortgage Investment Corp (NYSE:CHMI). This market value of the stocks from this group match MIFI’s market value.
|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 9 hedge funds with bullish positions and the average amount invested in these stocks was $13 million. That figure was $9 million in MIFI’s case. Morgans Hotel Group Co. (NASDAQ:MHGC) is the most popular stock in this table. On the other hand Roundy’s Inc (NYSE:RNDY) is the least popular one with only 6 bullish hedge fund positions. Novatel Wireless Inc (NASDAQ:MIFI) is not the least popular stock in this group, yet hedge fund interest is still below average and its former top shareholder in our database sold off the stock. This is a negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard Morgans Hotel Group might be a better candidate to consider a long position in.
Correction: This article previously incorrectly stated that DG Capital sold a major stake in Novatel Wireless.