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Did Hedge Funds Make The Right Call On SVMK Inc. (SVMK)?

How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding SVMK Inc. (NASDAQ:SVMK) and determine whether hedge funds had an edge regarding this stock.

Is SVMK Inc. (NASDAQ:SVMK) worth your attention right now? The best stock pickers were taking a bearish view. The number of bullish hedge fund positions went down by 2 in recent months. Our calculations also showed that SVMK 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). SVMK was in 29 hedge funds’ portfolios at the end of March. There were 31 hedge funds in our database with SVMK holdings at the end of the previous quarter.

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

Today there are tons of formulas stock market investors can use to appraise publicly traded companies. A pair of the best formulas are hedge fund and insider trading activity. Our researchers have shown that, historically, those who follow the best picks of the elite investment managers can outpace the broader indices by a healthy margin (see the details here).

Christopher S. Kiper Legion Partners Asset Management

Christopher Kiper of Legion Partners Asset Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a “weekend trading strategy”, so we look into his strategy’s picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller’s investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let’s review the recent hedge fund action encompassing SVMK Inc. (NASDAQ:SVMK).

How have hedgies been trading SVMK Inc. (NASDAQ:SVMK)?

Heading into the second quarter of 2020, a total of 29 of the hedge funds tracked by Insider Monkey were long this stock, a change of -6% from the fourth quarter of 2019. Below, you can check out the change in hedge fund sentiment towards SVMK over the last 18 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in SVMK Inc. (NASDAQ:SVMK) was held by Tiger Global Management LLC, which reported holding $31.1 million worth of stock at the end of September. It was followed by Legion Partners Asset Management with a $28.3 million position. Other investors bullish on the company included Park West Asset Management, ThornTree Capital Partners, and Royce & Associates. In terms of the portfolio weights assigned to each position Legion Partners Asset Management allocated the biggest weight to SVMK Inc. (NASDAQ:SVMK), around 11.94% of its 13F portfolio. ThornTree Capital Partners is also relatively very bullish on the stock, designating 7.11 percent of its 13F equity portfolio to SVMK.

Judging by the fact that SVMK Inc. (NASDAQ:SVMK) has witnessed declining sentiment from the smart money, it’s easy to see that there were a few funds who were dropping their entire stakes by the end of the first quarter. Intriguingly, Zachary Miller’s Parian Global Management said goodbye to the largest position of the 750 funds tracked by Insider Monkey, totaling an estimated $10.7 million in stock, and Pasco Alfaro / Richard Tumure’s Miura Global Management was right behind this move, as the fund said goodbye to about $9.7 million worth. These moves are intriguing to say the least, as total hedge fund interest dropped by 2 funds by the end of the first quarter.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as SVMK Inc. (NASDAQ:SVMK) but similarly valued. We will take a look at Greif, Inc. (NYSE:GEF), Prestige Consumer Healthcare Inc. (NYSE:PBH), Denali Therapeutics Inc. (NASDAQ:DNLI), and Cathay General Bancorp (NASDAQ:CATY). All of these stocks’ market caps are closest to SVMK’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
GEF 17 64067 -1
PBH 17 86125 3
DNLI 14 70980 5
CATY 15 21855 1
Average 15.75 60757 2

View table here if you experience formatting issues.

As you can see these stocks had an average of 15.75 hedge funds with bullish positions and the average amount invested in these stocks was $61 million. That figure was $212 million in SVMK’s case. Greif, Inc. (NYSE:GEF) is the most popular stock in this table. On the other hand Denali Therapeutics Inc. (NASDAQ:DNLI) is the least popular one with only 14 bullish hedge fund positions. Compared to these stocks SVMK Inc. (NASDAQ:SVMK) is more popular among hedge funds. 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 returned 12.3% in 2020 through June 30th but still managed to beat the market by 15.5 percentage points. Hedge funds were also right about betting on SVMK as the stock returned 74.2% in Q2 and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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