Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips on the charts, usually don’t make them change their opinion towards a company. This time it may be different. During the third quarter we observed increased volatility and small-cap stocks underperformed the market. Hedge fund investor letters indicated that they are cutting their overall exposure, closing out some position and doubling down on others. Let’s take a look at the hedge fund sentiment towards Vringo, Inc. (NASDAQ:VRNG) to find out whether it was one of their high conviction long-term ideas.
Vringo, Inc. shares haven’t seen a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 4 hedge funds’ portfolios at the end of the third quarter of 2015. 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 LRAD Corp (NASDAQ:LRAD), Palatin Technologies, Inc. (NYSEMKT:PTN), and Emmis Communications Corporation (NASDAQ:EMMS) to gather more data points.
In the eyes of most market participants, hedge funds are viewed as slow, old investment vehicles of the past. While there are greater than 8000 funds trading at present, Our experts hone in on the upper echelon of this club, around 700 funds. These hedge fund managers direct the lion’s share of all hedge funds’ total asset base, and by keeping track of their top investments, Insider Monkey has figured out numerous investment strategies that have historically surpassed the S&P 500 index. Insider Monkey’s small-cap hedge fund strategy surpassed the S&P 500 index by 12 percentage points a year for a decade in their back tests.
With all of this in mind, we’re going to check out the latest action surrounding Vringo, Inc. (NASDAQ:VRNG).
What does the smart money think about Vringo, Inc. (NASDAQ:VRNG)?
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Israel Englander’s Millennium Management has the largest position in Vringo, Inc. (NASDAQ:VRNG), worth close to $0.8 million, corresponding to less than 0.1% of its total 13F portfolio. Some other peers that hold long positions encompass Sander Gerber’s Hudson Bay Capital Management, D E Shaw, and Ken Griffin’s Citadel Investment Group.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: LMR Partners. One hedge fund selling its entire position doesn’t always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don’t think this is the case in this case because only one of the 700+ hedge funds tracked by Insider Monkey identified as a viable investment and initiated a position in the stock (that fund was Millennium Management).
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Vringo, Inc. (NASDAQ:VRNG) but similarly valued. We will take a look at LRAD Corp (NASDAQ:LRAD), Palatin Technologies, Inc. (NYSEMKT:PTN), Emmis Communications Corporation (NASDAQ:EMMS), and UCP Inc (NYSE:UCP). All of these stocks’ market caps match VRNG’s market cap.
|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 5 hedge funds with bullish positions and the average amount invested in these stocks was $8 million. That figure was $1 million in VRNG’s case. Palatin Technologies, Inc. (NYSEMKT:PTN) is the most popular stock in this table. On the other hand Emmis Communications Corporation (NASDAQ:EMMS) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks Vringo, Inc. (NASDAQ:VRNG) is as less popular as EMMS. Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case more research is warranted.