Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors' consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of CEVA, Inc. (NASDAQ:CEVA).
CEVA, Inc. (NASDAQ:CEVA) shares haven't seen a lot of action during the first quarter. Overall, hedge fund sentiment was unchanged. The stock was in 10 hedge funds' portfolios at the end of March. The level and the change in hedge fund popularity aren't the only variables you need to analyze to decipher hedge funds' perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That's why at the end of this article we will examine companies such as Retail Value Inc. (NYSE:RVI), Aurinia Pharmaceuticals Inc (NASDAQ:AUPH), and 500.com Limited (NYSE:WBAI) to gather more data points.
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' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were 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'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 30.9% through May 30, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
We're going to go over the fresh hedge fund action encompassing CEVA, Inc. (NASDAQ:CEVA).
How are hedge funds trading CEVA, Inc. (NASDAQ:CEVA)?
At the end of the first quarter, a total of 10 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards CEVA over the last 15 quarters. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Rima Senvest Management was the largest shareholder of CEVA, Inc. (NASDAQ:CEVA), with a stake worth $13.5 million reported as of the end of March. Trailing Rima Senvest Management was Millennium Management, which amassed a stake valued at $4.4 million. Renaissance Technologies, D E Shaw, and Two Sigma Advisors were also very fond of the stock, giving the stock large weights in their portfolios.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Weld Capital Management. One hedge fund selling its entire position doesn't always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don't think this is the case in this case because only one of the 800+ hedge funds tracked by Insider Monkey identified as a viable investment and initiated a position in the stock (that fund was Caxton Associates LP).
Let's also examine hedge fund activity in other stocks similar to CEVA, Inc. (NASDAQ:CEVA). These stocks are Retail Value Inc. (NYSE:RVI), Aurinia Pharmaceuticals Inc (NASDAQ:AUPH), 500.com Limited (NYSE:WBAI), and Gamco Investors Inc. (NYSE:GBL). This group of stocks' market caps are closest to CEVA's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position RVI,17,168765,4 AUPH,13,88651,5 WBAI,2,426,1 GBL,9,11633,1 Average,10.25,67369,2.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 10.25 hedge funds with bullish positions and the average amount invested in these stocks was $67 million. That figure was $30 million in CEVA's case. Retail Value Inc. (NYSE:RVI) is the most popular stock in this table. On the other hand 500.com Limited (NYSE:WBAI) is the least popular one with only 2 bullish hedge fund positions. CEVA, Inc. (NASDAQ:CEVA) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and 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 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. Unfortunately CEVA wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); CEVA investors were disappointed as the stock returned -11.5% 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 20 most popular stocks among hedge funds as 13 of these stocks already outperformed the market so far in Q2.
Disclosure: None. This article was originally published at Insider Monkey.