It was a rough fourth quarter for many hedge funds, which were naturally unable to overcome the big dip in the broad market, as the S&P 500 fell by about 7% during October and average hedge fund losing about 3%. The Russell 2000, composed of smaller companies, performed even worse, trailing the S&P by about 4 percentage points during the first half of Q4, as investors fled less-known quantities for safe havens. This was the case with hedge funds, who we heard were pulling money from the market amid the volatility, which included money from small-cap stocks, which they invest in at a higher rate than other investors. This action contributed to the greater decline in these stocks during the tumultuous period. We will study how this market volatility affected their sentiment towards StarTek, Inc. (NYSE:SRT) during the quarter below.
Is StarTek, Inc. (NYSE:SRT) a bargain? The best stock pickers are selling. The number of long hedge fund bets fell by 1 in recent months. Our calculations also showed that SRT isn't among the 30 most popular stocks among hedge funds. SRT was in 6 hedge funds' portfolios at the end of September. There were 7 hedge funds in our database with SRT positions at the end of the previous quarter.
Why do we pay any attention at all to hedge fund sentiment? 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 18 percentage points since May 2014 through December 3, 2018 (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 24% through December 3, 2018. 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 latest hedge fund action regarding StarTek, Inc. (NYSE:SRT).
How are hedge funds trading StarTek, Inc. (NYSE:SRT)?
At Q3's end, a total of 6 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -14% from one quarter earlier. By comparison, 6 hedge funds held shares or bullish call options in SRT heading into this year. 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, Renaissance Technologies was the largest shareholder of StarTek, Inc. (NYSE:SRT), with a stake worth $4.7 million reported as of the end of September. Trailing Renaissance Technologies was Engine Capital, which amassed a stake valued at $3.5 million. Ancora Advisors, Millennium Management, and BlueCrest Capital Mgmt. were also very fond of the stock, giving the stock large weights in their portfolios.
Since StarTek, Inc. (NYSE:SRT) has faced falling interest from the smart money, it's safe to say that there was a specific group of fund managers that decided to sell off their full holdings last quarter. It's worth mentioning that Ben Levine, Andrew Manuel and Stefan Renold's LMR Partners cut the largest investment of all the hedgies followed by Insider Monkey, worth an estimated $0.2 million in stock. Benjamin A. Smith's fund, Laurion Capital Management, also said goodbye to its stock, about $0.1 million worth. These moves are interesting, as aggregate hedge fund interest was cut by 1 funds last quarter.
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as StarTek, Inc. (NYSE:SRT) but similarly valued. We will take a look at Stratus Properties Inc. (NASDAQ:STRS), Eaton Vance Senior Income Trust (NYSE:EVF), First Trust New Opportunities MLP & Energy Fund (NYSE:FPL), and Invesco Trust for Investment Grade New York Municipal (NYSE:VTN). All of these stocks' market caps match SRT's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position STRS,4,44960,2 EVF,4,3165,0 FPL,1,569,0 VTN,3,819,0 Average,3,12378,0.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 3 hedge funds with bullish positions and the average amount invested in these stocks was $12 million. That figure was $11 million in SRT's case. Stratus Properties Inc. (NASDAQ:STRS) is the most popular stock in this table. On the other hand First Trust New Opportunities MLP & Energy Fund (NYSE:FPL) is the least popular one with only 1 bullish hedge fund positions. Compared to these stocks StarTek, Inc. (NYSE:SRT) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.
Disclosure: None. This article was originally published at Insider Monkey.