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We can judge whether Eastside Distilling, Inc. (NASDAQ:EAST) is a good investment right now by following the lead of some of the best investors in the world and piggybacking their ideas. There's no better way to get these firms' immense resources and analytical capabilities working for us than to follow their lead into their best ideas. While not all of these picks will be winners, our research shows that these picks historically outperformed the market when we factor in known risk factors.
Is Eastside Distilling, Inc. (NASDAQ:EAST) going to take off soon? Investors who are in the know are taking a pessimistic view. The number of long hedge fund positions decreased by 1 recently. Our calculations also showed that EAST isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). EAST was in 4 hedge funds' portfolios at the end of September. There were 5 hedge funds in our database with EAST positions at the end of the previous quarter.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
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.
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Chuck Royce of Royce & Associates[/caption]
We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. 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 even check out this option genius' weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager's investor letter and the stock already gained 20 percent. Keeping this in mind let's take a look at the latest hedge fund action surrounding Eastside Distilling, Inc. (NASDAQ:EAST).
How are hedge funds trading Eastside Distilling, Inc. (NASDAQ:EAST)?
At the end of the third quarter, a total of 4 of the hedge funds tracked by Insider Monkey were long this stock, a change of -20% from the second quarter of 2019. On the other hand, there were a total of 4 hedge funds with a bullish position in EAST a year ago. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to Insider Monkey's hedge fund database, Royce & Associates, managed by Chuck Royce, holds the biggest position in Eastside Distilling, Inc. (NASDAQ:EAST). Royce & Associates has a $2 million position in the stock, comprising less than 0.1%% of its 13F portfolio. Sitting at the No. 2 spot is Manatuck Hill Partners, led by Mark Broach, holding a $1.3 million position; the fund has 0.7% of its 13F portfolio invested in the stock. Other peers with similar optimism contain Charles Paquelet's Skylands Capital, Keith M. Rosenbloom's Cruiser Capital Advisors and . In terms of the portfolio weights assigned to each position Manatuck Hill Partners allocated the biggest weight to Eastside Distilling, Inc. (NASDAQ:EAST), around 0.72% of its 13F portfolio. Cruiser Capital Advisors is also relatively very bullish on the stock, earmarking 0.4 percent of its 13F equity portfolio to EAST.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Citadel Investment Group. 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 none of the 750+ hedge funds tracked by Insider Monkey identified EAST as a viable investment and initiated a position in the stock.
Let's check out hedge fund activity in other stocks similar to Eastside Distilling, Inc. (NASDAQ:EAST). We will take a look at Big 5 Sporting Goods Corporation (NASDAQ:BGFV), Aclaris Therapeutics, Inc. (NASDAQ:ACRS), BBQ Holdings, Inc. (NASDAQ:BBQ), and ICC Holdings, Inc. (NASDAQ:ICCH). This group of stocks' market caps are similar to EAST's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position BGFV,12,5737,-2 ACRS,15,19036,1 BBQ,4,18207,4 ICCH,3,1303,0 Average,8.5,11071,0.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 8.5 hedge funds with bullish positions and the average amount invested in these stocks was $11 million. That figure was $5 million in EAST's case. Aclaris Therapeutics, Inc. (NASDAQ:ACRS) is the most popular stock in this table. On the other hand ICC Holdings, Inc. (NASDAQ:ICCH) is the least popular one with only 3 bullish hedge fund positions. Eastside Distilling, Inc. (NASDAQ:EAST) 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. 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. Unfortunately EAST wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); EAST investors were disappointed as the stock returned -35.6% during the first two months of the fourth quarter 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 in Q4.
Disclosure: None. This article was originally published at Insider Monkey.