USA Technologies, Inc. (USAT): Are Hedge Funds Right About This Stock?

Does USA Technologies, Inc. (NASDAQ:USAT) represent a good buying opportunity at the moment? Let’s briefly check the hedge fund interest towards the company. Hedge fund firms constantly search out bright intellectuals and highly-experienced employees and throw away millions of dollars on research activities, so it is no wonder why they tend to generate millions in profits each year. It is also true that some hedge fund players fail inconceivably on some occasions, but their stock picks have been generating superior risk-adjusted returns on average over the years.

USA Technologies, Inc. (NASDAQ:USAT) has seen an increase in enthusiasm from smart money of late. USAT was in 15 hedge funds’ portfolios at the end of the third quarter of 2018. There were 13 hedge funds in our database with USAT holdings at the end of the previous quarter. Our calculations also showed that usat isn’t among the 30 most popular stocks among hedge funds.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 18 percentage points since May 2014 through December 3, 2018 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 24% through December 3, 2018. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Philip Hempleman Ardsley Partners

We’re going to analyze the fresh hedge fund action regarding USA Technologies, Inc. (NASDAQ:USAT).

How are hedge funds trading USA Technologies, Inc. (NASDAQ:USAT)?

At the end of the third quarter, a total of 15 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 15% from one quarter earlier. On the other hand, there were a total of 9 hedge funds with a bullish position in USAT at the beginning of this year. With hedge funds’ sentiment swirling, there exists a select group of noteworthy hedge fund managers who were adding to their holdings significantly (or already accumulated large positions).

No of Hedge Funds with USAT Positions

Among these funds, Ardsley Partners held the most valuable stake in USA Technologies, Inc. (NASDAQ:USAT), which was worth $6.7 million at the end of the third quarter. On the second spot was G2 Investment Partners Management which amassed $6.1 million worth of shares. Moreover, Royce & Associates, Point72 Asset Management, and Citadel Investment Group were also bullish on USA Technologies, Inc. (NASDAQ:USAT), allocating a large percentage of their portfolios to this stock.

Consequently, key money managers have been driving this bullishness. Ardsley Partners, managed by Philip Hempleman, established the most outsized position in USA Technologies, Inc. (NASDAQ:USAT). Ardsley Partners had $6.7 million invested in the company at the end of the quarter. Israel Englander’s Millennium Management also made a $2.3 million investment in the stock during the quarter. The other funds with new positions in the stock are Steve Cohen’s Point72 Asset Management, D. E. Shaw’s D E Shaw, and Josh Goldberg’s G2 Investment Partners Management.

Let’s now review hedge fund activity in other stocks similar to USA Technologies, Inc. (NASDAQ:USAT). These stocks are Catalyst Pharmaceuticals, Inc. (NASDAQ:CPRX), Sterling Construction Company, Inc. (NASDAQ:STRL), Abraxas Petroleum Corp. (NASDAQ:AXAS), and Accuray Incorporated (NASDAQ:ARAY). This group of stocks’ market valuations resemble USAT’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CPRX 15 92575 1
STRL 12 60350 0
AXAS 10 39623 -5
ARAY 17 66381 2
Average 13.5 64732 -0.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 13.5 hedge funds with bullish positions and the average amount invested in these stocks was $65 million. That figure was $32 million in USAT’s case. Accuray Incorporated (NASDAQ:ARAY) is the most popular stock in this table. On the other hand Abraxas Petroleum Corp. (NASDAQ:AXAS) is the least popular one with only 10 bullish hedge fund positions. USA Technologies, Inc. (NASDAQ:USAT) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard ARAY might be a better candidate to consider a long position.

Disclosure: None. This article was originally published at Insider Monkey.