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Did Hedge Funds Drop The Ball On Inseego Corp. (INSG) ?

Nina Todic

Is Inseego Corp. (NASDAQ:INSG) a good place to invest some of your money right now? We can gain invaluable insight to help us answer that question by studying the investment trends of top investors, who employ world-class Ivy League graduates, who are given immense resources and industry contacts to put their financial expertise to work. The top picks of these firms have historically outperformed the market when we account for known risk factors, making them very valuable investment ideas.

Inseego Corp. (NASDAQ:INSG) shares haven't seen a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 8 hedge funds' portfolios at the end of September. 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 Karuna Therapeutics, Inc. (NASDAQ:KRTX), Village Super Market, Inc. (NASDAQ:VLGEA), and Switchback Energy Acquisition Corporation (NYSE:SBE) to gather more data points. Our calculations also showed that INSG isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

5 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_26340" align="aligncenter" width="467"] Ken Griffin of Citadel Investment Group[/caption]

CITADEL INVESTMENT GROUP

We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world's largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, "I'm investing more today than I did back in early 2009." So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds' buy/sell signals. Let's analyze the recent hedge fund action encompassing Inseego Corp. (NASDAQ:INSG).

Hedge fund activity in Inseego Corp. (NASDAQ:INSG)

At the end of the third quarter, a total of 8 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the second quarter of 2019. The graph below displays the number of hedge funds with bullish position in INSG over the last 17 quarters. With hedge funds' positions undergoing their usual ebb and flow, there exists an "upper tier" of noteworthy hedge fund managers who were adding to their holdings significantly (or already accumulated large positions).

The largest stake in Inseego Corp. (NASDAQ:INSG) was held by Cannell Capital, which reported holding $9.2 million worth of stock at the end of September. It was followed by Renaissance Technologies with a $3.9 million position. Other investors bullish on the company included Sculptor Capital, Springbok Capital, and Citadel Investment Group. In terms of the portfolio weights assigned to each position Cannell Capital allocated the biggest weight to Inseego Corp. (NASDAQ:INSG), around 2.99% of its 13F portfolio. Springbok Capital is also relatively very bullish on the stock, earmarking 0.05 percent of its 13F equity portfolio to INSG.

Due to the fact that Inseego Corp. (NASDAQ:INSG) has experienced declining sentiment from hedge fund managers, it's easy to see that there is a sect of money managers that slashed their full holdings last quarter. At the top of the heap, Highbridge Capital Management cut the biggest investment of the 750 funds tracked by Insider Monkey, comprising an estimated $32 million in stock, and Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital was right behind this move, as the fund said goodbye to about $2.6 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).

Let's check out hedge fund activity in other stocks similar to Inseego Corp. (NASDAQ:INSG). These stocks are Karuna Therapeutics, Inc. (NASDAQ:KRTX), Village Super Market, Inc. (NASDAQ:VLGEA), Switchback Energy Acquisition Corporation (NYSE:SBE), and Verrica Pharmaceuticals Inc. (NASDAQ:VRCA). This group of stocks' market caps are closest to INSG's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position KRTX,9,22332,0 VLGEA,8,40571,0 SBE,17,109079,17 VRCA,3,72329,-2 Average,9.25,61078,3.75 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 9.25 hedge funds with bullish positions and the average amount invested in these stocks was $61 million. That figure was $16 million in INSG's case. Switchback Energy Acquisition Corporation (NYSE:SBE) is the most popular stock in this table. On the other hand Verrica Pharmaceuticals Inc. (NASDAQ:VRCA) is the least popular one with only 3 bullish hedge fund positions. Inseego Corp. (NASDAQ:INSG) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. A small number of hedge funds were also right about betting on INSG as the stock returned 32.3% during the first two months of Q4 and outperformed the market by an even larger margin.

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

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