Hedge fund managers like David Einhorn, Dan Loeb, or Carl Icahn became billionaires through reaping large profits for their investors, which is why piggybacking their stock picks may provide us with significant returns as well. Many hedge funds, like Paul Singer’s Elliott Management, are pretty secretive, but we can still get some insights by analyzing their quarterly 13F filings. One of the most fertile grounds for large abnormal returns is hedge funds’ most popular small-cap picks, which are not so widely followed and often trade at a discount to their intrinsic value. In this article we will check out hedge fund activity in another small-cap stock: EarthLink Holdings Corp. (NASDAQ:ELNK).
EarthLink Holdings Corp. (NASDAQ:ELNK) was included in 13F portfolios of 20 funds tracked by Insider Monkey at the end of September. ELNK investors should pay attention to a decrease in hedge fund sentiment in recent months, as there had been 22 funds in our database with ELNK positions at the end of the previous quarter. Nevertheless, the level and the change in hedge fund popularity aren’t the only variables you need to analyze 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 Nimble Storage Inc (NYSE:NMBL), New York Mortgage Trust, Inc. (NASDAQ:NYMT), and The Providence Service Corporation (NASDAQ:PRSC) to gather more data points.
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.
With all of this in mind, let’s view the fresh action surrounding EarthLink Holdings Corp. (NASDAQ:ELNK).
What does the smart money think about EarthLink Holdings Corp. (NASDAQ:ELNK)?
During the third quarter, the number of investors tracked by Insider Monkey long EarthLink Holdings inched down by 9% to 20. Below, you can check out the change in hedge fund sentiment towards ELNK over the last five quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Of the funds tracked by Insider Monkey, Jim Simons’ Renaissance Technologies has the biggest position inEarthLink Holdings Corp. (NASDAQ:ELNK), worth close to $48.6 million, corresponding to 0.1% of its total 13F portfolio. Coming in second is Royce & Associates, led by Chuck Royce, holding a $18.1 million position; 0.1% of its 13F portfolio is allocated to the company. Some other members of the smart money that are bullish comprise Mario Gabelli’s GAMCO Investors, Israel Englander’s Millennium Management, and Joel Greenblatt’s Gotham Asset Management. 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.
Due to the fact thatEarthLink Holdings Corp. (NASDAQ:ELNK) has weathered bearish sentiment from hedge fund managers, it’s safe to say that there lies a certain “tier” of money managers that elected to cut their entire stakes last quarter. Intriguingly, Robert B. Gillam’s McKinley Capital Management cut the largest investment of the “upper crust” of funds watched by Insider Monkey, totaling close to $5.6 million in stock, and Mark Coe’s Coe Capital Management was right behind this move, as the fund sold off about $4.9 million worth of shares.
Let’s now take a look at hedge fund activity in other stocks similar toEarthLink Holdings Corp. (NASDAQ:ELNK). We will take a look at Nimble Storage Inc (NYSE:NMBL), New York Mortgage Trust, Inc. (NASDAQ:NYMT), The Providence Service Corporation (NASDAQ:PRSC), and Calgon Carbon Corporation (NYSE:CCC). This group of stocks’ market values match ELNK’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 11 funds with bullish positions and the average amount invested in these stocks was $92 million. That figure was $98 million in ELNK’s case. Nimble Storage Inc (NYSE:NMBL) is the most popular stock in this table, while New York Mortgage Trust, Inc. (NASDAQ:NYMT) is the least popular one with only three bullish hedge fund positions. Compared to these stocksEarthLink Holdings Corp. (NASDAQ:ELNK) 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.