What Hedge Fund Sentiment Says About Hercules Technology Growth Capital Inc (HTGC)?

Like everyone else, elite investors make mistakes. Some of their top consensus picks, such as Micron and Anadarko Petroleum, have not done well during the last 12 months ending in October due to various reasons. Nevertheless, the data show elite investors’ consensus picks have done well on average. The top 30 S&P 500 stocks among hedge funds at the end of September 2014 yielded an average return of 9.5% during the last four quarters ending in October and sixty three percent of these 30 stocks outperformed the market. S&P 500 Index returned only 5.2% during the same period and less than 49% of its constituents managed to beat this return. Because their consensus picks have done well, we pay attention to what elite funds think before doing extensive research on a stock. In this article, we take a closer look at Hercules Technology Growth Capital Inc (NYSE:HTGC) from the perspective of those elite funds.

Is Hercules Technology Growth Capital Inc (NYSE:HTGC) ready to rally soon? Money managers are in a slightly bearish mood, as the number of long hedge fund positions has inched down by 1 recently. 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 Rofin-Sinar Technologies (NASDAQ:RSTI), ADTRAN, Inc. (NASDAQ:ADTN), and Luminex Corporation (NASDAQ:LMNX) to gather more data points.

In the 21st century investor’s toolkit there are numerous signals investors have at their disposal to grade publicly traded companies. A duo of the most under-the-radar signals are hedge fund and insider trading sentiment. our researchers have shown that, historically, those who follow the best picks of the elite money managers can outperform their index-focused peers by a healthy margin (see the details here).

Now, we’re going to check out the fresh action encompassing Hercules Technology Growth Capital Inc (NYSE:HTGC).

How have hedgies been trading Hercules Technology Growth Capital Inc (NYSE:HTGC)?

At the end of the third quarter, a total of 13 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -7% from the second quarter. With hedgies’ capital changing hands, there exists a few notable hedge fund managers who were upping their holdings significantly (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Lee Munder’s Lee Munder Capital Group has the biggest position in Hercules Technology Growth Capital Inc (NYSE:HTGC), worth close to $11.4 million, amounting to 0.2% of its total 13F portfolio. Sitting at the second spot is Cardinal Capital, managed by Amy Minella, which holds a $10 million position; the fund has 0.6% of its 13F portfolio invested in the stock. Some other hedge funds and institutional investors with similar optimism include Ken Griffin’s Citadel Investment Group, Israel Englander’s Millennium Management and Anton Schutz’s Mendon Capital Advisors.

Since Hercules Technology Growth Capital Inc (NYSE:HTGC) has experienced a bearish sentiment from hedge fund managers, we can see that there exists a select few fund managers who sold off their entire stakes by the end of the third quarter. Interestingly, Eric Halet and Davide Serra’s Algebris Investments sold off the largest stake of all the hedgies followed by Insider Monkey, worth about $4.4 million in stock, while Charles Clough of Clough Capital Partners was right behind this move, as the fund dropped about $0.9 million worth of shares.

Let’s check out hedge fund activity in other stocks similar to Hercules Technology Growth Capital Inc (NYSE:HTGC). These stocks are Rofin-Sinar Technologies (NASDAQ:RSTI), ADTRAN, Inc. (NASDAQ:ADTN), Luminex Corporation (NASDAQ:LMNX), and Harsco Corporation (NYSE:HSC). This group of stocks’ market values resemble HTGC’s market value.

As you can see these stocks had an average of 17 hedge funds with bullish positions and the average amount invested in these stocks was $83 million. That figure was $35 million in HTGC’s case. Luminex Corporation (NASDAQ:LMNX) is the most popular stock in this table, while ADTRAN, Inc. (NASDAQ:ADTN) is the least popular one with only 11 bullish hedge fund positions. Hercules Technology Growth Capital Inc (NYSE:HTGC) is not the least popular stock in this group, but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard LMNX might be a better candidate to consider a long position.