In this article you are going to find out whether hedge funds think Quotient Technology Inc (NYSE:QUOT) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It's not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.
Is Quotient Technology Inc (NYSE:QUOT) a buy, sell, or hold? Prominent investors are taking an optimistic view. The number of bullish hedge fund positions went up by 3 recently. Our calculations also showed that QUOT isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks). QUOT was in 18 hedge funds' portfolios at the end of the first quarter of 2020. There were 15 hedge funds in our database with QUOT holdings at the end of the previous quarter. Video: Watch our video about the top 5 most popular hedge fund stocks.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 58 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
[caption id="attachment_27480" align="aligncenter" width="400"] Israel Englander of Millennium Management[/caption]
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. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind we're going to go over the fresh hedge fund action regarding Quotient Technology Inc (NYSE:QUOT).
What does smart money think about Quotient Technology Inc (NYSE:QUOT)?
At Q1's end, a total of 18 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 20% from one quarter earlier. By comparison, 16 hedge funds held shares or bullish call options in QUOT a year ago. With the smart money's capital changing hands, there exists a select group of key hedge fund managers who were upping their holdings significantly (or already accumulated large positions).
According to Insider Monkey's hedge fund database, Cynthia Paul's Lynrock Lake has the most valuable position in Quotient Technology Inc (NYSE:QUOT), worth close to $113.9 million, corresponding to 11.2% of its total 13F portfolio. The second largest stake is held by Bill Miller of Miller Value Partners, with a $47.3 million position; the fund has 3% of its 13F portfolio invested in the stock. Remaining members of the smart money that are bullish encompass Douglas T. Granat's Trigran Investments, Richard Mashaal's Rima Senvest Management and Renaissance Technologies. In terms of the portfolio weights assigned to each position Lynrock Lake allocated the biggest weight to Quotient Technology Inc (NYSE:QUOT), around 11.22% of its 13F portfolio. Trigran Investments is also relatively very bullish on the stock, dishing out 7.71 percent of its 13F equity portfolio to QUOT.
Now, specific money managers were leading the bulls' herd. Engineers Gate Manager, managed by Greg Eisner, created the most valuable position in Quotient Technology Inc (NYSE:QUOT). Engineers Gate Manager had $0.4 million invested in the company at the end of the quarter. Michael Gelband's ExodusPoint Capital also made a $0.1 million investment in the stock during the quarter. The other funds with new positions in the stock are Minhua Zhang's Weld Capital Management and Karim Abbadi and Edward McBride's Centiva Capital.
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Quotient Technology Inc (NYSE:QUOT) but similarly valued. These stocks are SMART Global Holdings, Inc. (NASDAQ:SGH), Linx S.A. (NYSE:LINX), Range Resources Corp. (NYSE:RRC), and Revlon Inc (NYSE:REV). All of these stocks' market caps resemble QUOT's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SGH,17,264406,-1 LINX,5,11501,1 RRC,23,154075,-6 REV,36,178239,-2 Average,20.25,152055,-2 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 20.25 hedge funds with bullish positions and the average amount invested in these stocks was $152 million. That figure was $242 million in QUOT's case. Revlon Inc (NYSE:REV) is the most popular stock in this table. On the other hand Linx S.A. (NYSE:LINX) is the least popular one with only 5 bullish hedge fund positions. Quotient Technology Inc (NYSE:QUOT) 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 13.4% in 2020 through June 22nd and surpassed the market by 15.9 percentage points. Unfortunately QUOT wasn't nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); QUOT investors were disappointed as the stock returned 13.7% during the second 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 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
Disclosure: None. This article was originally published at Insider Monkey.