At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Fluent, Inc. (NASDAQ:FLNT).
Is Fluent (FLNT) a good stock to buy now? Hedge fund interest in Fluent, Inc. (NASDAQ:FLNT) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that FLNT 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 FLNT to other stocks including Secoo Holding Limited (NASDAQ:SECO), Protective Insurance Corporation (NASDAQ:PTVCB), and Regional Management Corp (NYSE:RM) to get a better sense of its popularity.
Video: Watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 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.
Israel Englander of Millennium Management
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 15 best blue chip stocks 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. Now we're going to go over the recent hedge fund action encompassing Fluent, Inc. (NASDAQ:FLNT).
How are hedge funds trading Fluent, Inc. (NASDAQ:FLNT)?
At the end of September, a total of 7 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the second quarter of 2020. By comparison, 8 hedge funds held shares or bullish call options in FLNT a year ago. With the smart money's capital changing hands, there exists an "upper tier" of noteworthy hedge fund managers who were adding to their holdings substantially (or already accumulated large positions).
Among these funds, Renaissance Technologies held the most valuable stake in Fluent, Inc. (NASDAQ:FLNT), which was worth $0.7 million at the end of the third quarter. On the second spot was Arrowstreet Capital which amassed $0.6 million worth of shares. Millennium Management, Bailard Inc, and D E Shaw were 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 Zebra Capital Management allocated the biggest weight to Fluent, Inc. (NASDAQ:FLNT), around 0.05% of its 13F portfolio. Bailard Inc is also relatively very bullish on the stock, dishing out 0.01 percent of its 13F equity portfolio to FLNT.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Paloma Partners. 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 Renaissance Technologies).
Let's now review hedge fund activity in other stocks similar to Fluent, Inc. (NASDAQ:FLNT). We will take a look at Secoo Holding Limited (NASDAQ:SECO), Protective Insurance Corporation (NASDAQ:PTVCB), Regional Management Corp (NYSE:RM), Gaia, Inc. (NASDAQ:GAIA), CorMedix Inc. (NYSE:CRMD), Saratoga Investment Corp (NYSE:SAR), and Nymox Pharmaceutical Corporation (NASDAQ:NYMX). This group of stocks' market caps are similar to FLNT's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SECO,4,9837,-1 PTVCB,5,12437,0 RM,13,46680,-3 GAIA,15,32144,2 CRMD,5,12462,2 SAR,5,5782,-2 NYMX,1,88,-1 Average,6.9,17061,-0.4 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 6.9 hedge funds with bullish positions and the average amount invested in these stocks was $17 million. That figure was $2 million in FLNT's case. Gaia, Inc. (NASDAQ:GAIA) is the most popular stock in this table. On the other hand Nymox Pharmaceutical Corporation (NASDAQ:NYMX) is the least popular one with only 1 bullish hedge fund positions. Fluent, Inc. (NASDAQ:FLNT) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for FLNT is 49.8. 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 31.6% in 2020 through December 2nd and still beat the market by 16 percentage points. Hedge funds were also right about betting on FLNT as the stock returned 55.2% since the end of Q3 (through 12/2) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.