Looking for high-potential stocks? Just follow the big players within the hedge fund industry. Why should you do so? Let’s take a brief look at what statistics have to say about hedge funds’ stock picking abilities to illustrate. The Standard and Poor’s 500 Index returned approximately 7.6% in the 12 months ending November 21, with more than 51% of the stocks in the index failing to beat the benchmark. Therefore, the odds that one will pin down a winner by randomly picking a stock are less than the odds in a fair coin-tossing game. Conversely, best performing hedge funds’ 30 preferred mid-cap stocks generated a return of 18% during the same 12-month period. Coincidence? It might happen to be so, but it is unlikely. Our research covering a 17-year period indicates that hedge funds’ stock picks generate superior risk-adjusted returns. That’s why we believe it is wise to check hedge fund activity before you invest your time or your savings on a stock like SolarCity Corp (NASDAQ:SCTY) .
SolarCity Corp (NASDAQ:SCTY) was in 19 hedge funds’ portfolios at the end of September. SCTY investors should pay attention to a decrease in hedge fund sentiment lately. There were 26 hedge funds in our database with SCTY holdings at the end of the previous quarter. 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 Owens & Minor, Inc. (NYSE:OMI), Fulton Financial Corp (NASDAQ:FULT), and Kite Realty Group Trust (NYSE:KRG) to gather more data points.
At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.
How have hedgies been trading SolarCity Corp (NASDAQ:SCTY)?
At the end of the third quarter, a total of 19 of the hedge funds tracked by Insider Monkey held long positions in this stock, a fall of 27% from one quarter earlier. By comparison, 29 hedge funds held shares or bullish call options in SCTY heading into this year. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
When looking at the institutional investors followed by Insider Monkey, Robert Emil Zoellner’s Alpine Associates has the biggest position in SolarCity Corp (NASDAQ:SCTY), worth close to $17.5 million. Coming in second is Kenneth Tropin’s Graham Capital Management, which holds a $10.2 million position. Other peers that are bullish include Ken Griffin’s Citadel Investment Group, Daniel Gold’s QVT Financial and Philippe Laffont’s Coatue Management. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.