As we already know from media reports and hedge fund investor letters, many hedge funds lost money in fourth quarter, blaming macroeconomic conditions and unpredictable events that hit several sectors, with technology among them. Nevertheless, most investors decided to stick to their bullish theses and recouped their losses by the end of the first quarter. We get to see hedge funds' thoughts towards the market and individual stocks by aggregating their quarterly portfolio movements and reading their investor letters. In this article, we will particularly take a look at what hedge funds think about Carbonite Inc (NASDAQ:CARB).
Is Carbonite Inc (NASDAQ:CARB) a first-rate stock to buy now? The smart money is in a bullish mood. The number of bullish hedge fund positions rose by 4 recently. Our calculations also showed that CARB isn't among the 30 most popular stocks among hedge funds.
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 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. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.
We're going to check out the latest hedge fund action encompassing Carbonite Inc (NASDAQ:CARB).
How are hedge funds trading Carbonite Inc (NASDAQ:CARB)?
Heading into the second quarter of 2019, a total of 20 of the hedge funds tracked by Insider Monkey were long this stock, a change of 25% from the fourth quarter of 2018. The graph below displays the number of hedge funds with bullish position in CARB over the last 15 quarters. With the smart money's sentiment swirling, there exists an "upper tier" of key hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).
More specifically, Elliott Management was the largest shareholder of Carbonite Inc (NASDAQ:CARB), with a stake worth $29.4 million reported as of the end of March. Trailing Elliott Management was Indaba Capital Management, which amassed a stake valued at $26.7 million. Renaissance Technologies, Portolan Capital Management, and Millennium Management were also very fond of the stock, giving the stock large weights in their portfolios.
With a general bullishness amongst the heavyweights, some big names have jumped into Carbonite Inc (NASDAQ:CARB) headfirst. Elliott Management, managed by Paul Singer, established the most outsized position in Carbonite Inc (NASDAQ:CARB). Elliott Management had $29.4 million invested in the company at the end of the quarter. Derek C. Schrier's Indaba Capital Management also made a $26.7 million investment in the stock during the quarter. The following funds were also among the new CARB investors: Paul Marshall and Ian Wace's Marshall Wace LLP, Lee Ainslie's Maverick Capital, and Ken Griffin's Citadel Investment Group.
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Carbonite Inc (NASDAQ:CARB) but similarly valued. We will take a look at Nightstar Therapeutics plc (NASDAQ:NITE), Omeros Corporation (NASDAQ:OMER), Controladora Vuela Co Avcn SA CV (NYSE:VLRS), and X Financial (NYSE:XYF). This group of stocks' market caps match CARB's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position NITE,14,119090,6 OMER,6,98765,-1 VLRS,10,88125,3 XYF,2,4088,0 Average,8,77517,2 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 8 hedge funds with bullish positions and the average amount invested in these stocks was $78 million. That figure was $146 million in CARB's case. Nightstar Therapeutics plc (NASDAQ:NITE) is the most popular stock in this table. On the other hand X Financial (NYSE:XYF) is the least popular one with only 2 bullish hedge fund positions. Compared to these stocks Carbonite Inc (NASDAQ:CARB) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. Unfortunately CARB wasn't nearly as popular as these 20 stocks and hedge funds that were betting on CARB were disappointed as the stock returned 1.5% during the same 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 20 most popular stocks among hedge funds as 13 of these stocks already outperformed the market in Q2.
Disclosure: None. This article was originally published at Insider Monkey.