Billionaire hedge fund managers such as Steve Cohen and Stan Druckenmiller can generate millions or even billions of dollars every year by pinning down high-potential small-cap stocks and pouring cash into these candidates. Small-cap stocks are overlooked by most investors, brokerage houses, and financial services hubs, while the unlimited research abilities of the big players within the hedge fund industry can easily identify the undervalued and high-potential stocks that reside the ignored corners of equity markets. There are numerous small-cap stocks that have turned out to be great winners, which is one of the main reasons the Insider Monkey team pays close attention to the hedge fund activity in relation to these stocks.
Hedge fund interest in Rocky Brands, Inc. (NASDAQ:RCKY) shares was flat at the end of last quarter. This is usually a negative indicator. 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 Allot Communications Ltd. (NASDAQ:ALLT), Medley Capital Corp (NYSE:MCC), and Consolidated Water Co. Ltd. (NASDAQ:CWCO) to gather more data points.
In the eyes of most traders, hedge funds are perceived as slow, old investment vehicles of years past. While there are over 8,000 funds with their doors open at the moment, Our experts look at the crème de la crème of this club, around 700 funds. Most estimates calculate that this group of people administer the majority of all hedge funds' total capital, and by keeping an eye on their inimitable equity investments, Insider Monkey has identified a number of investment strategies that have historically surpassed the market. Insider Monkey's flagship hedge fund strategy outrun the S&P 500 index by 6 percentage points a year since its inception in May 2014 through early November 2018. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 24% since February 2017 (through December 3rd) even though the market was up nearly 23% during the same period. We just shared a list of 11 short targets in our latest quarterly update.
[caption id="attachment_30621" align="aligncenter" width="487"] Cliff Asness of AQR Capital Management[/caption]
We're going to analyze the key hedge fund action regarding Rocky Brands, Inc. (NASDAQ:RCKY).
Hedge fund activity in Rocky Brands, Inc. (NASDAQ:RCKY)
Heading into the fourth quarter of 2018, a total of 6 of the hedge funds tracked by Insider Monkey held long positions in this stock, representing no change from one quarter earlier. The graph below displays the number of hedge funds with bullish position in RCKY over the last 13 quarters. With hedge funds' sentiment swirling, there exists a select group of notable hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).
Among these funds, Renaissance Technologies held the most valuable stake in Rocky Brands, Inc. (NASDAQ:RCKY), which was worth $6.7 million at the end of the third quarter. On the second spot was GLG Partners which amassed $5.8 million worth of shares. Moreover, AQR Capital Management, Millennium Management, and Bailard Inc were also bullish on Rocky Brands, Inc. (NASDAQ:RCKY), allocating a large percentage of their portfolios to this stock.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Algert Coldiron Investors. 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 Millennium Management).
Let's check out hedge fund activity in other stocks similar to Rocky Brands, Inc. (NASDAQ:RCKY). We will take a look at Allot Communications Ltd. (NASDAQ:ALLT), Medley Capital Corp (NYSE:MCC), Consolidated Water Co. Ltd. (NASDAQ:CWCO), and FS Bancorp, Inc. (NASDAQ:FSBW). This group of stocks' market valuations resemble RCKY's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ALLT,6,44081,0 MCC,6,19419,0 CWCO,2,5919,-2 FSBW,8,30035,1 Average,5.5,24864,-0.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 5.5 hedge funds with bullish positions and the average amount invested in these stocks was $25 million. That figure was $16 million in RCKY's case. FS Bancorp, Inc. (NASDAQ:FSBW) is the most popular stock in this table. On the other hand Consolidated Water Co. Ltd. (NASDAQ:CWCO) is the least popular one with only 2 bullish hedge fund positions. Rocky Brands, Inc. (NASDAQ:RCKY) 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. In this regard FSBW might be a better candidate to consider a long position.
Disclosure: None. This article was originally published at Insider Monkey.