At Insider Monkey, we pore over the filings of nearly 866 top investment firms every quarter, a process we have now completed for the latest reporting period. The data we've gathered as a result gives us access to a wealth of collective knowledge based on these firms' portfolio holdings as of March 31st. In this article, we will use that wealth of knowledge to determine whether or not QuinStreet Inc (NASDAQ:QNST) makes for a good investment right now.
QuinStreet Inc (NASDAQ:QNST) investors should be aware of an increase in activity from the world's largest hedge funds lately. QuinStreet Inc (NASDAQ:QNST) was in 20 hedge funds' portfolios at the end of March. The all time high for this statistic is 28. There were 16 hedge funds in our database with QNST positions at the end of the fourth quarter. Our calculations also showed that QNST isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings).
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 115 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.
Donald Sussman of Paloma Partners
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, Chuck Schumer recently stated that marijuana legalization will be a Senate priority. So, we are checking out this under the radar stock that will benefit from this. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. With all of this in mind let's review the recent hedge fund action surrounding QuinStreet Inc (NASDAQ:QNST).
Do Hedge Funds Think QNST Is A Good Stock To Buy Now?
At the end of the first quarter, a total of 20 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 25% from the fourth quarter of 2020. The graph below displays the number of hedge funds with bullish position in QNST over the last 23 quarters. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Private Capital Management was the largest shareholder of QuinStreet Inc (NASDAQ:QNST), with a stake worth $53.2 million reported as of the end of March. Trailing Private Capital Management was Royce & Associates, which amassed a stake valued at $28.6 million. Renaissance Technologies, Portolan Capital Management, and Arrowstreet 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 Private Capital Management allocated the biggest weight to QuinStreet Inc (NASDAQ:QNST), around 9.06% of its 13F portfolio. Portolan Capital Management is also relatively very bullish on the stock, setting aside 1.38 percent of its 13F equity portfolio to QNST.
Now, specific money managers have jumped into QuinStreet Inc (NASDAQ:QNST) headfirst. Millennium Management, managed by Israel Englander, assembled the biggest position in QuinStreet Inc (NASDAQ:QNST). Millennium Management had $3 million invested in the company at the end of the quarter. Michael Gelband's ExodusPoint Capital also initiated a $0.5 million position during the quarter. The following funds were also among the new QNST investors: Greg Eisner's Engineers Gate Manager, Donald Sussman's Paloma Partners, and Paul Tudor Jones's Tudor Investment Corp.
Let's now review hedge fund activity in other stocks similar to QuinStreet Inc (NASDAQ:QNST). These stocks are iClick Interactive Asia Group Limited (NASDAQ:ICLK), Celestica Inc. (NYSE:CLS), Syndax Pharmaceuticals, Inc. (NASDAQ:SNDX), Nkarta, Inc. (NASDAQ:NKTX), Personalis, Inc. (NASDAQ:PSNL), Scorpio Tankers Inc. (NYSE:STNG), and American Finance Trust, Inc. (NASDAQ:AFIN). This group of stocks' market valuations match QNST's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ICLK,9,19971,1 CLS,13,134815,0 SNDX,33,486256,-4 NKTX,15,384765,1 PSNL,13,220652,-2 STNG,20,87802,2 AFIN,7,11773,-1 Average,15.7,192291,-0.4 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 15.7 hedge funds with bullish positions and the average amount invested in these stocks was $192 million. That figure was $159 million in QNST's case. Syndax Pharmaceuticals, Inc. (NASDAQ:SNDX) is the most popular stock in this table. On the other hand American Finance Trust, Inc. (NASDAQ:AFIN) is the least popular one with only 7 bullish hedge fund positions. QuinStreet Inc (NASDAQ:QNST) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for QNST is 55.4. 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. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 23.8% in 2021 through July 16th and beat the market again by 7.7 percentage points. Unfortunately QNST wasn't nearly as popular as these 5 stocks and hedge funds that were betting on QNST were disappointed as the stock returned -11.8% since the end of March (through 7/16) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.
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Disclosure: None. This article was originally published at Insider Monkey.