Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that’s why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to smartest analysts and expensive data/information sources that individual investors can’t match. So should one consider investing in Chicken Soup for the Soul Entertainment, Inc. (NASDAQ:CSSE)? The smart money sentiment can provide an answer to this question.
Chicken Soup for the Soul Entertainment, Inc. (NASDAQ:CSSE) shares haven’t seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 3 hedge funds’ portfolios at the end of September. Our calculations also showed that CSSE isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks). At the end of this article we will also compare CSSE to other stocks including LiveXLive Media, Inc. (NASDAQ:LIVX), Integra Resources Corp. (NYSE:ITRG), and Calyxt, Inc. (NASDAQ:CLXT) to get a better sense of its popularity.
Video: Watch our video about the top 5 most popular hedge fund stocks.
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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 66 percentage points since March 2017 (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 13% through November 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website.Keeping this in mind let’s take a look at the fresh hedge fund action surrounding Chicken Soup for the Soul Entertainment, Inc. (NASDAQ:CSSE).
What have hedge funds been doing with Chicken Soup for the Soul Entertainment, Inc. (NASDAQ:CSSE)?
At third quarter’s end, a total of 3 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the previous quarter. On the other hand, there were a total of 1 hedge funds with a bullish position in CSSE a year ago. With hedge funds’ positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were increasing their holdings substantially (or already accumulated large positions).
Among these funds, Greenhaven Road Investment Management held the most valuable stake in Chicken Soup for the Soul Entertainment, Inc. (NASDAQ:CSSE), which was worth $11.8 million at the end of the third quarter. On the second spot was Royce & Associates which amassed $7.4 million worth of shares. SG Capital Management was also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Greenhaven Road Investment Management allocated the biggest weight to Chicken Soup for the Soul Entertainment, Inc. (NASDAQ:CSSE), around 4.56% of its 13F portfolio. SG Capital Management is also relatively very bullish on the stock, setting aside 0.13 percent of its 13F equity portfolio to CSSE.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Millennium Management. 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 800+ hedge funds tracked by Insider Monkey identified as a viable investment and initiated a position in the stock (that fund was SG Capital Management).
Let’s check out hedge fund activity in other stocks similar to Chicken Soup for the Soul Entertainment, Inc. (NASDAQ:CSSE). These stocks are LiveXLive Media, Inc. (NASDAQ:LIVX), Integra Resources Corp. (NYSE:ITRG), Calyxt, Inc. (NASDAQ:CLXT), Marrone Bio Innovations Inc (NASDAQ:MBII), American Outdoor Brands, Inc. (NASDAQ:AOUT), Danaos Corporation (NYSE:DAC), and SM Energy Company (NYSE:SM). This group of stocks’ market valuations are similar to CSSE’s market valuation.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 7.3 hedge funds with bullish positions and the average amount invested in these stocks was $17 million. That figure was $20 million in CSSE’s case. SM Energy Company (NYSE:SM) is the most popular stock in this table. On the other hand Integra Resources Corp. (NYSE:ITRG) is the least popular one with only 1 bullish hedge fund positions. Chicken Soup for the Soul Entertainment, Inc. (NASDAQ:CSSE) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for CSSE is 42.1. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 28.1% in 2020 through November 23rd and still beat the market by 15.4 percentage points. A small number of hedge funds were also right about betting on CSSE as the stock returned 12.1% since the end of the third quarter (through 11/23) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.