We can judge whether The Meet Group, Inc. (NASDAQ:MEET) 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.
The Meet Group, Inc. (NASDAQ:MEET) investors should be aware of a decrease in hedge fund sentiment lately. MEET was in 12 hedge funds' portfolios at the end of the second quarter of 2019. There were 15 hedge funds in our database with MEET positions at the end of the previous quarter. Our calculations also showed that MEET isn't among the 30 most popular stocks among hedge funds (see the video below). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. 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 market by 40 percentage points since May 2014 through May 30, 2019 (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.
[caption id="attachment_30621" align="aligncenter" width="487"] Cliff Asness of AQR Capital Management[/caption]
In addition to following the biggest hedge funds for investment ideas, we also share stock pitches from conferences, investor letters and other sources like this one where the fund manager is talking about two under the radar 1000% return potential stocks: first one in internet infrastructure and the second in the heart of advertising market. We use hedge fund buy/sell signals to determine whether to conduct in-depth analysis of these stock ideas which take days. Now we're going to take a look at the recent hedge fund action encompassing The Meet Group, Inc. (NASDAQ:MEET).
Hedge fund activity in The Meet Group, Inc. (NASDAQ:MEET)
At Q2's end, a total of 12 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -20% from the previous quarter. By comparison, 8 hedge funds held shares or bullish call options in MEET a year ago. With the smart money's capital changing hands, there exists an "upper tier" of notable hedge fund managers who were adding to their holdings meaningfully (or already accumulated large positions).
Among these funds, Arrowstreet Capital held the most valuable stake in The Meet Group, Inc. (NASDAQ:MEET), which was worth $6.2 million at the end of the second quarter. On the second spot was AQR Capital Management which amassed $1.6 million worth of shares. Moreover, Two Sigma Advisors, Citadel Investment Group, and Renaissance Technologies were also bullish on The Meet Group, Inc. (NASDAQ:MEET), allocating a large percentage of their portfolios to this stock.
Judging by the fact that The Meet Group, Inc. (NASDAQ:MEET) has experienced a decline in interest from the entirety of the hedge funds we track, it's safe to say that there was a specific group of hedgies that decided to sell off their entire stakes in the second quarter. It's worth mentioning that Christian Leone's Luxor Capital Group said goodbye to the biggest investment of the 750 funds monitored by Insider Monkey, valued at about $59.6 million in call options. Matthew Hulsizer's fund, PEAK6 Capital Management, also sold off its call options, about $1.1 million worth. These moves are interesting, as aggregate hedge fund interest fell by 3 funds in the second quarter.
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as The Meet Group, Inc. (NASDAQ:MEET) but similarly valued. We will take a look at Dynavax Technologies Corporation (NASDAQ:DVAX), Protective Insurance Corporation (NASDAQ:PTVCB), 22nd Century Group, Inc (NYSE:XXII), and Xinyuan Real Estate Co., Ltd. (NYSE:XIN). All of these stocks' market caps are similar to MEET's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position DVAX,12,43367,-4 PTVCB,5,21097,-2 XXII,3,328,1 XIN,7,3605,0 Average,6.75,17099,-1.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 6.75 hedge funds with bullish positions and the average amount invested in these stocks was $17 million. That figure was $12 million in MEET's case. Dynavax Technologies Corporation (NASDAQ:DVAX) is the most popular stock in this table. On the other hand 22nd Century Group, Inc (NYSE:XXII) is the least popular one with only 3 bullish hedge fund positions. The Meet Group, Inc. (NASDAQ:MEET) 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 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately MEET wasn't nearly as popular as these 20 stocks and hedge funds that were betting on MEET were disappointed as the stock returned -5.7% during the third 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 many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.