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This Metric Says You Are Smart to Sell Arris Group, Inc. (ARRS)

Investing in hedge funds can bring large profits, but it’s not for everybody, since hedge funds are available only for high-net-worth individuals. They generate significant returns for investors to justify their large fees and they allocate a lot of time and employ a complex analysis to determine the best stocks to invest in. A particularly interesting group of stocks that hedge funds like is the small-caps. The huge amount of capital does not allow hedge funds to invest a lot in small-caps, but our research showed that their most popular small-cap ideas are less efficiently priced and generate stronger returns than their large- and mega-cap picks and the broader market. That is why we follow the hedge fund activity in the small-cap space.

Is Arris Group, Inc. (NASDAQ:ARRS) worth your attention right now? Prominent investors are taking a pessimistic view. The number of bullish hedge fund bets went down by 6 lately. ARRS was in 35 hedge funds’ portfolio at the end of September. There were 41 hedge funds in our database with ARRS positions at the end of the previous quarter.

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According to most shareholders, hedge funds are viewed as unimportant, outdated financial vehicles of years past. While there are greater than 8000 funds trading at the moment, Experts at hedge fund tracking site Insider Monkey look at the masters of this club, approximately 700 funds. It is estimated that this group of investors manage the lion’s share of the hedge fund industry’s total capital, and by tracking their matchless picks, Insider Monkey has revealed a number of investment strategies that have historically beaten the S&P 500 index. Insider Monkey’s small-cap hedge fund strategy surpassed the S&P 500 index by 18 percentage points per annum for a decade in their back tests.

With all of this in mind, we’re going to take a gander at the new action encompassing Arris Group, Inc. (NASDAQ:ARRS).

What have hedge funds been doing with Arris Group, Inc. (NASDAQ:ARRS)?

Heading into Q4, a total of 35 of the hedge funds tracked by Insider Monkey were long in this stock, a change of -15% from one quarter earlier. With hedge funds’ positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were upping their holdings considerably.

When looking at the hedgies followed by Insider Monkey, Maverick Capital, managed by Lee Ainslie, holds the number one position in Arris Group, Inc. (NASDAQ:ARRS). Maverick Capital has a $205.2 million position in the stock, comprising 3.5% of its 13F portfolio. The second largest stake is held by Valinor Management LLC, led by David Gallo, holding a $166.8 million position; the fund has 4.4% of its 13F portfolio invested in the stock. Remaining members of the smart money that hold long positions consist of Robert Rodriguez and Steven Romick’s First Pacific Advisors LLC, Ricky Sandler’s Eminence Capital and Joe Huber’s Huber Capital Management.

Since Arris Group, Inc. (NASDAQ:ARRS) has faced declining sentiment from hedge fund managers, it’s safe to say that there exists a select few funds that elected to cut their positions entirely in third quarter. Intriguingly, Howard Guberman’s Gruss Asset Management sold off the biggest investment of the 700 funds watched by Insider Monkey, comprising an estimated $16.1 million in stock. Steve Cohen’s fund, Point72 Asset Management, also sold off its stock, about $11.6 million worth. These transactions are important to note, as aggregate hedge fund interest was cut by 6 funds in third quarter.

Let’s also review hedge fund activity in other stocks similar to Arris Group, Inc. (NASDAQ:ARRS). We will take a look at Starz (NASDAQ:STRZA), Vail Resorts, Inc. (NYSE:MTN), Sonoco Products Company (NYSE:SON), and WellCare Health Plans, Inc. (NYSE:WCG). This group of stocks’ market values are similar to ARRS’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
STRZA 29 724488 2
MTN 26 361720 3
SON 24 116135 2
WCG 32 724867 1

With the returns shown by Insider Monkey’s tactics, everyday investors must always keep an eye on hedge fund activity, and Arris Group, Inc. (NASDAQ:ARRS) applies perfectly to this mantra.

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