The Insider Monkey team has completed processing the quarterly 13F filings for the September quarter submitted by the hedge funds and other money managers included in our extensive database. Most hedge fund investors experienced strong gains on the back of a strong market performance, which certainly propelled them to adjust their equity holdings so as to maintain the desired risk profile. As a result, the relevancy of these public filings and their content is indisputable, as they may reveal numerous high-potential stocks. The following article will discuss the smart money sentiment towards Stamps.com Inc. (NASDAQ:STMP).
Is Stamps.com Inc. (NASDAQ:STMP) a healthy stock for your portfolio? Prominent investors are getting less optimistic. The number of bullish hedge fund positions shrunk by 2 recently. Our calculations also showed that STMP isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). STMP was in 17 hedge funds' portfolios at the end of the third quarter of 2019. There were 19 hedge funds in our database with STMP holdings at the end of the previous quarter. Video: Click the image to 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 Russell 2000 ETFs by 40 percentage points since May 2014 (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_365194" align="alignnone" width="600"] David E. Shaw of D.E. Shaw[/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. One of the most bullish analysts in America just put his money where his mouth is. He says, "I'm investing more today than I did back in early 2009." So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds' buy/sell signals. Let's analyze the recent hedge fund action surrounding Stamps.com Inc. (NASDAQ:STMP).
What does smart money think about Stamps.com Inc. (NASDAQ:STMP)?
At the end of the third quarter, a total of 17 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -11% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in STMP over the last 17 quarters. With the smart money's positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were adding to their holdings substantially (or already accumulated large positions).
Of the funds tracked by Insider Monkey, D E Shaw, managed by David E. Shaw, holds the biggest position in Stamps.com Inc. (NASDAQ:STMP). D E Shaw has a $98.1 million position in the stock, comprising 0.1% of its 13F portfolio. On D E Shaw's heels is Okumus Fund Management, managed by Ahmet Okumus, which holds a $77.9 million position; 21.2% of its 13F portfolio is allocated to the stock. Remaining professional money managers with similar optimism contain Ken Fisher's Fisher Asset Management, Jeffrey Jacobowitz's Simcoe Capital Management and John Overdeck and David Siegel's Two Sigma Advisors. In terms of the portfolio weights assigned to each position Okumus Fund Management allocated the biggest weight to Stamps.com Inc. (NASDAQ:STMP), around 21.21% of its 13F portfolio. Simcoe Capital Management is also relatively very bullish on the stock, dishing out 7.5 percent of its 13F equity portfolio to STMP.
Since Stamps.com Inc. (NASDAQ:STMP) has witnessed declining sentiment from the entirety of the hedge funds we track, logic holds that there were a few funds who were dropping their positions entirely by the end of the third quarter. Intriguingly, Israel Englander's Millennium Management dropped the largest position of the 750 funds followed by Insider Monkey, totaling about $19.3 million in stock, and James Thomas Berylson's Berylson Capital Partners was right behind this move, as the fund dumped about $1.8 million worth. These bearish behaviors are important to note, as total hedge fund interest fell by 2 funds by the end of the third quarter.
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Stamps.com Inc. (NASDAQ:STMP) but similarly valued. These stocks are Loral Space & Communications Ltd. (NASDAQ:LORL), Audentes Therapeutics, Inc. (NASDAQ:BOLD), Sykes Enterprises, Incorporated (NASDAQ:SYKE), and Boise Cascade Co (NYSE:BCC). This group of stocks' market values are closest to STMP's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position LORL,18,605943,2 BOLD,25,486348,-2 SYKE,13,71749,-2 BCC,13,52582,2 Average,17.25,304156,0 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 17.25 hedge funds with bullish positions and the average amount invested in these stocks was $304 million. That figure was $307 million in STMP's case. Audentes Therapeutics, Inc. (NASDAQ:BOLD) is the most popular stock in this table. On the other hand Sykes Enterprises, Incorporated (NASDAQ:SYKE) is the least popular one with only 13 bullish hedge fund positions. Stamps.com Inc. (NASDAQ:STMP) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. A small number of hedge funds were also right about betting on STMP as the stock returned 17.2% during the first two months of Q4 and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.