Did Hedge Funds Make The Right Call On SailPoint Technologies Holdings, Inc. (SAIL)?

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 (see why hell is coming). 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 SailPoint Technologies Holdings, Inc. (NYSE:SAIL) at the end of the first quarter and determine whether the smart money was really smart about this stock.

Is SailPoint Technologies Holdings, Inc. (NYSE:SAIL) a superb stock to buy now? Hedge funds were becoming less hopeful. The number of long hedge fund positions shrunk by 4 in recent months. Our calculations also showed that SAIL isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

To most stock holders, hedge funds are perceived as worthless, old investment tools of years past. While there are more than 8000 funds trading at the moment, Our researchers choose to focus on the top tier of this group, about 850 funds. Most estimates calculate that this group of people control the majority of the hedge fund industry’s total capital, and by keeping an eye on their inimitable investments, Insider Monkey has deciphered a number of investment strategies that have historically exceeded Mr. Market. Insider Monkey’s flagship short hedge fund strategy outrun the S&P 500 short ETFs by around 20 percentage points per year since its inception in March 2017. Our portfolio of short stocks lost 36% since February 2017 (through May 18th) even though the market was up 30% during the same period. We just shared a list of 8 short targets in our latest quarterly update .

Gil Simon of SoMa Equity Partners

Gil Simon of SoMa Equity Partners

At Insider Monkey we scour multiple sources to uncover the next great investment idea. Cannabis stocks are roaring back in 2020, so we are checking out this under-the-radar stock. We go through lists like the 10 most profitable companies in the world 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. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. Keeping this in mind we’re going to take a gander at the key hedge fund action regarding SailPoint Technologies Holdings, Inc. (NYSE:SAIL).

How have hedgies been trading SailPoint Technologies Holdings, Inc. (NYSE:SAIL)?

At the end of the first quarter, a total of 21 of the hedge funds tracked by Insider Monkey were long this stock, a change of -16% from the previous quarter. On the other hand, there were a total of 27 hedge funds with a bullish position in SAIL a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Of the funds tracked by Insider Monkey, SoMa Equity Partners, managed by Gil Simon, holds the biggest position in SailPoint Technologies Holdings, Inc. (NYSE:SAIL). SoMa Equity Partners has a $80.7 million position in the stock, comprising 4.5% of its 13F portfolio. The second largest stake is held by RGM Capital, led by Robert G. Moses, holding a $37.1 million position; 2.9% of its 13F portfolio is allocated to the company. Some other professional money managers that hold long positions consist of Steve Cohen’s Point72 Asset Management, Spencer M. Waxman’s Shannon River Fund Management and Renaissance Technologies. In terms of the portfolio weights assigned to each position SoMa Equity Partners allocated the biggest weight to SailPoint Technologies Holdings, Inc. (NYSE:SAIL), around 4.53% of its 13F portfolio. Shannon River Fund Management is also relatively very bullish on the stock, earmarking 3.07 percent of its 13F equity portfolio to SAIL.

Due to the fact that SailPoint Technologies Holdings, Inc. (NYSE:SAIL) has witnessed bearish sentiment from the aggregate hedge fund industry, it’s easy to see that there were a few fund managers who were dropping their positions entirely heading into Q4. Interestingly, Anthony Joseph Vaccarino’s North Fourth Asset Management dropped the largest position of the “upper crust” of funds monitored by Insider Monkey, worth an estimated $6.1 million in stock, and Parvinder Thiara’s Athanor Capital was right behind this move, as the fund dropped about $3.9 million worth. These moves are interesting, as total hedge fund interest fell by 4 funds heading into Q4.

Let’s also examine hedge fund activity in other stocks similar to SailPoint Technologies Holdings, Inc. (NYSE:SAIL). We will take a look at CSG Systems International, Inc. (NASDAQ:CSGS), InterDigital, Inc. (NASDAQ:IDCC), The Goodyear Tire & Rubber Company (NASDAQ:GT), and Embraer SA (NYSE:ERJ). This group of stocks’ market valuations resemble SAIL’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CSGS 19 170275 -4
IDCC 23 289642 -4
GT 26 129699 -6
ERJ 16 188996 2
Average 21 194653 -3

View table here if you experience formatting issues.

As you can see these stocks had an average of 21 hedge funds with bullish positions and the average amount invested in these stocks was $195 million. That figure was $204 million in SAIL’s case. The Goodyear Tire & Rubber Company (NASDAQ:GT) is the most popular stock in this table. On the other hand Embraer SA (NYSE:ERJ) is the least popular one with only 16 bullish hedge fund positions. SailPoint Technologies Holdings, Inc. (NYSE:SAIL) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 18.6% in 2020 through July 27th and still beat the market by 17.1 percentage points. A small number of hedge funds were also right about betting on SAIL as the stock returned 105.3% since the end of March and outperformed the market by an even larger margin.

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Disclosure: None. This article was originally published at Insider Monkey.