The market has been volatile in the last few months as the Federal Reserve finalized its rate cuts and uncertainty looms over trade negotiations with China. Small cap stocks have been hit hard as a result, as the Russell 2000 ETF (IWM) has underperformed the larger S&P 500 ETF (SPY) by more than 10 percentage points over the last 12 months. SEC filings and hedge fund investor letters indicate that the smart money seems to be paring back their overall long exposure since summer months, though some funds increased their exposure dramatically at the end of Q3 and the beginning of Q4. In this article, we analyze what the smart money thinks of 180 Degree Capital Corp. (NASDAQ:TURN) and find out how it is affected by hedge funds' moves.
Hedge fund interest in 180 Degree Capital Corp. (NASDAQ:TURN) shares was flat at the end of last quarter. This is usually a negative indicator. 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 RF Industries, Ltd. (NASDAQ:RFIL), RumbleOn, Inc. (NASDAQ:RMBL), and Global Eagle Entertainment Inc.(NASDAQ:ENT) to gather more data points. Our calculations also showed that TURN isn't among the 30 most popular stocks among hedge funds.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's flagship best performing hedge funds strategy returned 91% since May 2014 and outperformed the Russell 2000 ETFs by nearly 40 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
[caption id="attachment_26044" align="aligncenter" width="359"] Ken Griffin of Citadel Investment Group[/caption]
Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world's most bearish hedge fund that's more convinced than ever that a crash is coming, our long-short investment strategy doesn't rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds' buy/sell signals. Let's check out the recent hedge fund action surrounding 180 Degree Capital Corp. (NASDAQ:TURN).
How are hedge funds trading 180 Degree Capital Corp. (NASDAQ:TURN)?
At the end of the third quarter, a total of 2 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the second quarter of 2019. Below, you can check out the change in hedge fund sentiment towards TURN over the last 17 quarters. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Ariel Investments held the most valuable stake in 180 Degree Capital Corp. (NASDAQ:TURN), which was worth $6.2 million at the end of the third quarter. On the second spot was Ancora Advisors which amassed $1.1 million worth of shares.
Earlier we told you that the aggregate hedge fund interest in the stock was unchanged and we view this as a negative development. Even though there weren't any hedge funds dumping their holdings during the third quarter, there weren't any hedge funds initiating brand new positions. This indicates that hedge funds, at the very best, perceive this stock as dead money and they haven't identified any viable catalysts that can attract investor attention.
Let's now take a look at hedge fund activity in other stocks similar to 180 Degree Capital Corp. (NASDAQ:TURN). We will take a look at RF Industries, Ltd. (NASDAQ:RFIL), RumbleOn, Inc. (NASDAQ:RMBL), Global Eagle Entertainment Inc. (NASDAQ:ENT), and Volt Information Sciences, Inc. (NYSE:VOLT). This group of stocks' market values are similar to TURN's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position RFIL,3,6293,0 RMBL,6,7023,0 ENT,7,23371,0 VOLT,5,5093,0 Average,5.25,10445,0 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 5.25 hedge funds with bullish positions and the average amount invested in these stocks was $10 million. That figure was $7 million in TURN's case. Global Eagle Entertainment Inc. (NASDAQ:ENT) is the most popular stock in this table. On the other hand RF Industries, Ltd. (NASDAQ:RFIL) is the least popular one with only 3 bullish hedge fund positions. Compared to these stocks 180 Degree Capital Corp. (NASDAQ:TURN) is even less popular than RFIL. Hedge funds dodged a bullet by taking a bearish stance towards TURN. Our calculations showed that the top 20 most popular hedge fund stocks returned 34.7% in 2019 through November 22nd and outperformed the S&P 500 ETF (SPY) by 8.5 percentage points. Unfortunately TURN wasn't nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); TURN investors were disappointed as the stock returned 0% during the fourth quarter (through 11/22) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 70 percent of these stocks already outperformed the market so far in Q4.
Disclosure: None. This article was originally published at Insider Monkey.