How do we determine whether Solazyme Inc (NASDAQ:SZYM) makes for a good investment at the moment? We analyze the sentiment of a select group of the very best investors in the world, who spend immense amounts of time and resources studying companies. They may not always be right (no one is), but data shows that their consensus long positions have historically outperformed the market when we adjust for known risk factors.
Hedge fund interest in Solazyme Inc (NASDAQ:SZYM) 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 Xinyuan Real Estate Co., Ltd. (ADR) (NYSE:XIN), EXCO Resources Inc (NYSE:XCO), and LSI Industries, Inc. (NASDAQ:LYTS) to gather more data points.
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In the eyes of most shareholders, hedge funds are viewed as underperforming, old financial tools of years past. While there are greater than 8000 funds trading at the moment, Our experts choose to focus on the bigwigs of this club, around 700 funds. These investment experts have their hands on bulk of the smart money’s total asset base, and by observing their top picks, Insider Monkey has discovered a number of investment strategies that have historically exceeded the broader indices. Insider Monkey’s small-cap hedge fund strategy outperformed the S&P 500 index by 12 percentage points annually for a decade in their back tests.
Now, we’re going to take a peek at the latest action surrounding Solazyme Inc (NASDAQ:SZYM).
What does the smart money think about Solazyme Inc (NASDAQ:SZYM)?
At Q3’s end, a total of 6 of the hedge funds tracked by Insider Monkey were bullish on this stock, unchanged over the quarter. With the smart money’s sentiment swirling, there exists a few key hedge fund managers who were upping their stakes significantly (or already accumulated large positions).
Of the funds tracked by Insider Monkey, John Burbank’s Passport Capital has the most valuable position in Solazyme Inc (NASDAQ:SZYM), worth close to $15.6 million, comprising 0.3% of its total 13F portfolio. Sitting at the No. 2 spot is Citadel Investment Group, managed by Ken Griffin, which holds an $0.2 million call position; less than 0.1%% of its 13F portfolio is allocated to the company. Other professional money managers that are bullish consist of D. E. Shaw’s D E Shaw, Daniel S. Och’s OZ Management and Israel Englander’s Millennium Management.
Moreover, there lies a certain “tier” of money managers that elected to cut their full holdings by the end of the third quarter. Interestingly, John M. Angelo and Michael L. Gordon’s Angelo Gordon & Co said goodbye to the largest position of all the hedgies followed by Insider Monkey, valued at close to $0.9 million in stock, and William Harnisch’s Peconic Partners LLC was right behind this move, as the fund dumped about $0.1 million worth of shares.
Let’s also examine hedge fund activity in other stocks similar to Solazyme Inc (NASDAQ:SZYM). We will take a look at Xinyuan Real Estate Co., Ltd. (ADR) (NYSE:XIN), EXCO Resources Inc (NYSE:XCO), LSI Industries, Inc. (NASDAQ:LYTS), and Sequenom, Inc. (NASDAQ:SQNM). This group of stocks’ market values are closest to SZYM’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| XIN | 4 | 5996 | 0 |
| XCO | 12 | 92588 | -3 |
| LYTS | 10 | 28214 | 3 |
| SQNM | 11 | 47936 | -2 |
As you can see these stocks had an average of 9 hedge funds with bullish positions and the average amount invested in these stocks was $44 million, versus $16 million in SZYM’s case. EXCO Resources Inc (NYSE:XCO) is the most popular stock in this table. On the other hand Xinyuan Real Estate Co., Ltd. (ADR) (NYSE:XIN) is the least popular one with only 4 bullish hedge fund positions. Solazyme Inc (NASDAQ:SZYM) is not the least popular stock in this group, but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard XCO might be a better candidate to consider a long position.
