The latest 13F reporting period has come and gone, and Insider Monkey have plowed through 821 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds' and investors' portfolio positions as of March 31st, a week after the market trough. Now, we are almost done with the second quarter. Investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned almost 20% this quarter. In this article you are going to find out whether hedge funds thoughtTurtle Beach Corp (NASDAQ:HEAR) was a good investment heading into the second quarter and how the stock traded in comparison to the top hedge fund picks.
Is Turtle Beach Corp (NASDAQ:HEAR) a splendid investment right now? Prominent investors were turning less bullish. The number of bullish hedge fund positions were trimmed by 1 recently. Our calculations also showed that HEAR isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks). HEAR was in 10 hedge funds' portfolios at the end of the first quarter of 2020. There were 11 hedge funds in our database with HEAR holdings at the end of the previous quarter. Video: Watch our video about the top 5 most popular hedge fund stocks.
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' 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 S&P 500 ETFs by 58 percentage points since March 2017 (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.
At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a "weekend trading strategy", so we look into his strategy's picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller's investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Now let's take a look at the new hedge fund action encompassing Turtle Beach Corp (NASDAQ:HEAR).
What does smart money think about Turtle Beach Corp (NASDAQ:HEAR)?
At the end of the first quarter, a total of 10 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -9% from the fourth quarter of 2019. The graph below displays the number of hedge funds with bullish position in HEAR over the last 18 quarters. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Maverick Capital held the most valuable stake in Turtle Beach Corp (NASDAQ:HEAR), which was worth $0.7 million at the end of the third quarter. On the second spot was AWH Capital which amassed $0.7 million worth of shares. D E Shaw, Royce & Associates, and Citadel Investment Group were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position AWH Capital allocated the biggest weight to Turtle Beach Corp (NASDAQ:HEAR), around 3.71% of its 13F portfolio. Algert Coldiron Investors is also relatively very bullish on the stock, dishing out 0.03 percent of its 13F equity portfolio to HEAR.
Since Turtle Beach Corp (NASDAQ:HEAR) has witnessed falling interest from the aggregate hedge fund industry, it's easy to see that there was a specific group of hedge funds that decided to sell off their positions entirely heading into Q4. It's worth mentioning that Mark Broach's Manatuck Hill Partners dropped the biggest position of the "upper crust" of funds followed by Insider Monkey, valued at an estimated $2.3 million in stock, and Josh Goldberg's G2 Investment Partners Management was right behind this move, as the fund dumped about $0.5 million worth. These moves are intriguing to say the least, as total hedge fund interest fell by 1 funds heading into Q4.
Let's go over hedge fund activity in other stocks similar to Turtle Beach Corp (NASDAQ:HEAR). These stocks are Culp, Inc. (NYSE:CULP), Blue Ridge Bankshares, Inc. (NYSE:BRBS), LiqTech International Inc (NYSE:LIQT), and Phoenix New Media Ltd (NYSE:FENG). This group of stocks' market values match HEAR's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CULP,9,8619,1 BRBS,1,988,0 LIQT,3,4588,-3 FENG,6,8742,1 Average,4.75,5734,-0.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 4.75 hedge funds with bullish positions and the average amount invested in these stocks was $6 million. That figure was $4 million in HEAR's case. Culp, Inc. (NYSE:CULP) is the most popular stock in this table. On the other hand Blue Ridge Bankshares, Inc. (NYSE:BRBS) is the least popular one with only 1 bullish hedge fund positions. Compared to these stocks Turtle Beach Corp (NASDAQ:HEAR) is more popular among hedge funds. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks returned 12.3% in 2020 through June 30th but still managed to beat the market by 15.5 percentage points. Hedge funds were also right about betting on HEAR as the stock returned 135.9% in Q2 and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
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Disclosure: None. This article was originally published at Insider Monkey.