Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds' and successful investors' positions as of the end of the third quarter. You can find articles about an individual hedge fund's trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 5 years and analyze what the smart money thinks of QAD Inc. (NASDAQ:QADA) based on that data.
Is QADA a good stock to buy now? Money managers were taking a bearish view. The number of bullish hedge fund bets shrunk by 4 recently. QAD Inc. (NASDAQ:QADA) was in 14 hedge funds' portfolios at the end of September. The all time high for this statistic is 18. Our calculations also showed that QADA 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). There were 18 hedge funds in our database with QADA holdings at the end of June.
Video: Watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 66 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'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 17th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Wil Harkey Nantahala Capital
Wil Harkey of Nantahala 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 we're going to go over the latest hedge fund action regarding QAD Inc. (NASDAQ:QADA).
Do Hedge Funds Think QADA Is A Good Stock To Buy Now?
At third quarter's end, a total of 14 of the hedge funds tracked by Insider Monkey were long this stock, a change of -22% from the second quarter of 2020. Below, you can check out the change in hedge fund sentiment towards QADA over the last 21 quarters. With hedgies' sentiment swirling, there exists an "upper tier" of key hedge fund managers who were increasing their holdings considerably (or already accumulated large positions).
More specifically, Nantahala Capital Management was the largest shareholder of QAD Inc. (NASDAQ:QADA), with a stake worth $50 million reported as of the end of September. Trailing Nantahala Capital Management was Renaissance Technologies, which amassed a stake valued at $28.2 million. Harspring Capital Management, AltraVue Capital, and Royce & Associates 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 AltraVue Capital allocated the biggest weight to QAD Inc. (NASDAQ:QADA), around 5.85% of its 13F portfolio. Harspring Capital Management is also relatively very bullish on the stock, earmarking 3.69 percent of its 13F equity portfolio to QADA.
Judging by the fact that QAD Inc. (NASDAQ:QADA) has faced a decline in interest from hedge fund managers, we can see that there was a specific group of hedge funds who sold off their entire stakes last quarter. Interestingly, David Atterbury's Whetstone Capital Advisors dumped the largest stake of the 750 funds followed by Insider Monkey, comprising about $6.2 million in stock. Steven Baughman's fund, Divisar Capital, also dumped its stock, about $1.7 million worth. These bearish behaviors are important to note, as total hedge fund interest was cut by 4 funds last quarter.
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as QAD Inc. (NASDAQ:QADA) but similarly valued. These stocks are OceanFirst Financial Corp. (NASDAQ:OCFC), Johnson Outdoors Inc. (NASDAQ:JOUT), Granite Construction Incorporated (NYSE:GVA), Archrock, Inc. (NYSE:AROC), Delek US Holdings, Inc. (NYSE:DK), Mobileiron Inc (NASDAQ:MOBL), and BellRing Brands, Inc. (NYSE:BRBR). This group of stocks' market valuations resemble QADA's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position OCFC,15,36389,5 JOUT,15,91362,2 GVA,14,27374,1 AROC,10,18506,-2 DK,13,155379,-7 MOBL,25,240044,5 BRBR,11,124330,-5 Average,14.7,99055,-0.1 [/table]
As you can see these stocks had an average of 14.7 hedge funds with bullish positions and the average amount invested in these stocks was $99 million. That figure was $122 million in QADA's case. Mobileiron Inc (NASDAQ:MOBL) is the most popular stock in this table. On the other hand Archrock, Inc. (NYSE:AROC) is the least popular one with only 10 bullish hedge fund positions. QAD Inc. (NASDAQ:QADA) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for QADA is 37.7. 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. 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 32.9% in 2020 through December 8th and still beat the market by 16.2 percentage points. A small number of hedge funds were also right about betting on QADA as the stock returned 51.8% since the end of the third quarter (through 12/8) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.
