At Insider Monkey, we pore over the filings of nearly 750 top investment firms every quarter, a process we have now completed for the latest reporting period. The data we’ve gathered as a result gives us access to a wealth of collective knowledge based on these firms’ portfolio holdings as of September 30. In this article, we will use that wealth of knowledge to determine whether or not U.S. Auto Parts Network, Inc. (NASDAQ:PRTS) makes for a good investment right now.
Hedge fund interest in U.S. Auto Parts Network, Inc. (NASDAQ:PRTS) 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 Huttig Building Products, Inc. (NASDAQ:HBP), Finjan Holdings, Inc. (NASDAQ:FNJN), and ASLAN Pharmaceuticals Limited (NASDAQ:ASLN) to gather more data points. Our calculations also showed that PRTS isn’t among the 30 most popular stocks among hedge funds (see the video below). Video: Click the image to 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 Russell 2000 ETFs by 40 percentage points since May 2014 (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.
J. Carlo Cannell of Cannell Capital
Let’s take a peek at the key hedge fund action encompassing U.S. Auto Parts Network, Inc. (NASDAQ:PRTS).
What does smart money think about U.S. Auto Parts Network, Inc. (NASDAQ:PRTS)?
At the end of the third quarter, a total of 2 of the hedge funds tracked by Insider Monkey were long this stock, the same as one quarter earlier. By comparison, 5 hedge funds held shares or bullish call options in PRTS a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in U.S. Auto Parts Network, Inc. (NASDAQ:PRTS) was held by Renaissance Technologies, which reported holding $2.3 million worth of stock at the end of September. It was followed by Cannell Capital with a $1.8 million position.
Earlier we told you that the aggregate hedge fund interest in the stock was unchanged and we view this as a negative development. Even though there weren’t any hedge funds dumping their holdings during the third quarter, there weren’t any hedge funds initiating brand new positions. This indicates that hedge funds, at the very best, perceive this stock as dead money and they haven’t identified any viable catalysts that can attract investor attention.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as U.S. Auto Parts Network, Inc. (NASDAQ:PRTS) but similarly valued. We will take a look at Huttig Building Products, Inc. (NASDAQ:HBP), Finjan Holdings, Inc. (NASDAQ:FNJN), ASLAN Pharmaceuticals Limited (NASDAQ:ASLN), and Immutep Limited (NASDAQ:IMMP). This group of stocks’ market caps resemble PRTS’s market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position HBP,3,4793,0 FNJN,4,4117,0 ASLN,1,719,-1 IMMP,1,75,-1 Average,2.25,2426,-0.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 2.25 hedge funds with bullish positions and the average amount invested in these stocks was $2 million. That figure was $4 million in PRTS’s case. Finjan Holdings, Inc. (NASDAQ:FNJN) is the most popular stock in this table. On the other hand ASLAN Pharmaceuticals Limited (NASDAQ:ASLN) is the least popular one with only 1 bullish hedge fund positions. U.S. Auto Parts Network, Inc. (NASDAQ:PRTS) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 20 most popular stocks among hedge funds returned 34.7% in 2019 through November 22nd and outperformed the S&P 500 ETF (SPY) by 8.5 percentage points. A small number of hedge funds were also right about betting on PRTS as the stock returned 49% during Q4 (through 11/22) and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.