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Hedge Funds Are Crazy About QAD Inc. (QADA)

Asma UL Husna

The financial regulations require hedge funds and wealthy investors that exceeded the $100 million equity holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn't the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds' positions on March 31st, about a week after the S&P 500 Index bottomed. We at Insider Monkey have made an extensive database of more than 821 of those established hedge funds and famous value investors' filings. In this article, we analyze how these elite funds and prominent investors traded QAD Inc. (NASDAQ:QADA) based on those filings.

Is QAD Inc. (NASDAQ:QADA) a bargain? Prominent investors are getting more bullish. The number of long hedge fund positions moved up by 1 in recent months. Our calculations also showed that QADA 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). Video: Watch our video about the top 5 most popular hedge fund stocks.

At the moment there are several gauges shareholders have at their disposal to appraise their holdings. A couple of the most underrated gauges are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the top investment managers can outperform the S&P 500 by a superb margin (see the details here).

[caption id="attachment_26044" align="aligncenter" width="359"] Ken Griffin of Citadel Investment Group[/caption]

Ken Griffin CITADEL INVESTMENT GROUP

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, blockchain technology's influence will go beyond online payments. So, we are checking out this futurist's moonshot opportunities in tech stocks. We interview hedge fund managers and ask them about their best ideas. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind we're going to take a glance at the latest hedge fund action regarding QAD Inc. (NASDAQ:QADA).

How are hedge funds trading QAD Inc. (NASDAQ:QADA)?

At Q1's end, a total of 16 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 7% from the previous quarter. On the other hand, there were a total of 16 hedge funds with a bullish position in QADA 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.

Among these funds, Nantahala Capital Management held the most valuable stake in QAD Inc. (NASDAQ:QADA), which was worth $46.9 million at the end of the third quarter. On the second spot was Renaissance Technologies which amassed $24.8 million worth of shares. Harspring Capital Management, Royce & Associates, and AltraVue Capital 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 AltraVue Capital allocated the biggest weight to QAD Inc. (NASDAQ:QADA), around 7.16% of its 13F portfolio. Harspring Capital Management is also relatively very bullish on the stock, earmarking 5.74 percent of its 13F equity portfolio to QADA.

Consequently, specific money managers have jumped into QAD Inc. (NASDAQ:QADA) headfirst. Citadel Investment Group, managed by Ken Griffin, assembled the biggest position in QAD Inc. (NASDAQ:QADA). Citadel Investment Group had $0.7 million invested in the company at the end of the quarter.

Let's check out hedge fund activity in other stocks - not necessarily in the same industry as QAD Inc. (NASDAQ:QADA) but similarly valued. These stocks are Fiverr International Ltd. (NYSE:FVRR), Compass Diversified Holdings LLC (NYSE:CODI), Renewable Energy Group Inc (NASDAQ:REGI), and HeadHunter Group PLC (NASDAQ:HHR). This group of stocks' market valuations match QADA's market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position FVRR,13,54896,2 CODI,4,2635,-2 REGI,16,120237,-5 HHR,5,31273,-1 Average,9.5,52260,-1.5 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 9.5 hedge funds with bullish positions and the average amount invested in these stocks was $52 million. That figure was $121 million in QADA's case. Renewable Energy Group Inc (NASDAQ:REGI) is the most popular stock in this table. On the other hand Compass Diversified Holdings LLC (NYSE:CODI) is the least popular one with only 4 bullish hedge fund positions. QAD Inc. (NASDAQ:QADA) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but 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 13.3% in 2020 through June 25th but beat the market by 16.8 percentage points. Unfortunately QADA wasn't nearly as popular as these 10 stocks and hedge funds that were betting on QADA were disappointed as the stock returned 3.4% during the same time period 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 many of these stocks already outperformed the market so far this year.

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

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