At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards ChannelAdvisor Corp (NYSE:ECOM).
Is ECOM a good stock to buy now? Hedge fund interest in ChannelAdvisor Corp (NYSE:ECOM) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that ECOM isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks). 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 SP Plus Corp (NASDAQ:SP), Enerplus Corp (NYSE:ERF), and The Children's Place Inc. (NASDAQ:PLCE) to gather more data points.
Video: Watch our video about the top 5 most popular hedge fund stocks.
In today’s marketplace there are a lot of metrics stock traders put to use to appraise their holdings. A duo of the most innovative metrics are hedge fund and insider trading moves. Our researchers have shown that, historically, those who follow the best picks of the top money managers can outperform the S&P 500 by a very impressive amount (see the details here).
Roger Ibbotson of Zebra Capital Management
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Keeping this in mind let's take a look at the latest hedge fund action regarding ChannelAdvisor Corp (NYSE:ECOM).
Do Hedge Funds Think ECOM Is A Good Stock To Buy Now?
At Q3's end, a total of 19 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the second quarter of 2020. The graph below displays the number of hedge funds with bullish position in ECOM over the last 21 quarters. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in ChannelAdvisor Corp (NYSE:ECOM) was held by Driehaus Capital, which reported holding $30.4 million worth of stock at the end of September. It was followed by Nokomis Capital with a $9.7 million position. Other investors bullish on the company included Renaissance Technologies, Two Sigma Advisors, and Arrowstreet Capital. In terms of the portfolio weights assigned to each position Nokomis Capital allocated the biggest weight to ChannelAdvisor Corp (NYSE:ECOM), around 4.5% of its 13F portfolio. Driehaus Capital is also relatively very bullish on the stock, setting aside 0.62 percent of its 13F equity portfolio to ECOM.
Because ChannelAdvisor Corp (NYSE:ECOM) has witnessed a decline in interest from the aggregate hedge fund industry, we can see that there was a specific group of hedge funds who sold off their positions entirely last quarter. Interestingly, Rishi Bajaj, Toby Symonds, and Steve Tesoriere's Altai Capital cut the biggest investment of the 750 funds monitored by Insider Monkey, worth an estimated $0.7 million in stock, and Peter Muller's PDT Partners was right behind this move, as the fund cut about $0.5 million worth. These bearish behaviors are interesting, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let's check out hedge fund activity in other stocks - not necessarily in the same industry as ChannelAdvisor Corp (NYSE:ECOM) but similarly valued. We will take a look at SP Plus Corp (NASDAQ:SP), Enerplus Corp (NYSE:ERF), The Children's Place Inc. (NASDAQ:PLCE), Tekla Life Sciences Investors (NYSE:HQL), WAVE Life Sciences Ltd. (NASDAQ:WVE), Arlo Technologies, Inc. (NYSE:ARLO), and ASA Gold and Precious Metals Ltd (NYSE:ASA). This group of stocks' market valuations resemble ECOM's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SP,13,23906,-2 ERF,17,77008,1 PLCE,16,84447,-7 HQL,2,1362,0 WVE,24,163279,7 ARLO,16,43387,1 ASA,5,14951,0 Average,13.3,58334,0 [/table]
As you can see these stocks had an average of 13.3 hedge funds with bullish positions and the average amount invested in these stocks was $58 million. That figure was $63 million in ECOM's case. WAVE Life Sciences Ltd. (NASDAQ:WVE) is the most popular stock in this table. On the other hand Tekla Life Sciences Investors (NYSE:HQL) is the least popular one with only 2 bullish hedge fund positions. ChannelAdvisor Corp (NYSE:ECOM) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for ECOM is 73.6. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. This is a slightly positive signal but 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 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 30.7% in 2020 through December 14th and beat the market again by 15.8 percentage points. Unfortunately ECOM wasn't nearly as popular as these 20 stocks and hedge funds that were betting on ECOM were disappointed as the stock returned 5.5% since the end of September (through 12/14) 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 many of these stocks already outperformed the market so far this year.
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Disclosure: None. This article was originally published at Insider Monkey.
