We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do (like Peltz’s recent General Electric losses). However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards Sonim Technologies, Inc. (NASDAQ:SONM).
Is Sonim Technologies, Inc. (NASDAQ:SONM) a healthy stock for your portfolio? The best stock pickers were taking a bearish view. The number of long hedge fund positions fell by 5 in recent months. Sonim Technologies, Inc. (NASDAQ:SONM) was in 6 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistics is 11. Our calculations also showed that SONM isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks). There were 11 hedge funds in our database with SONM holdings at the end of June.
Video: Watch our video about the top 5 most popular hedge fund stocks.
To most market participants, hedge funds are viewed as unimportant, outdated financial vehicles of the past. While there are more than 8000 funds with their doors open at the moment, Our experts look at the top tier of this group, about 850 funds. Most estimates calculate that this group of people direct most of all hedge funds’ total capital, and by tracking their inimitable picks, Insider Monkey has formulated many investment strategies that have historically exceeded the S&P 500 index. Insider Monkey’s flagship short hedge fund strategy outpaced the S&P 500 short ETFs by around 20 percentage points a year since its inception in March 2017. Our portfolio of short stocks lost 13% since February 2017 (through November 17th) even though the market was up 65% during the same period. We just shared a list of 6 short targets in our latest quarterly update .
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks 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. You can subscribe to our free daily newsletter on our website. With all of this in mind let’s take a look at the new hedge fund action encompassing Sonim Technologies, Inc. (NASDAQ:SONM).
What does smart money think about Sonim Technologies, Inc. (NASDAQ:SONM)?
At third quarter’s end, a total of 6 of the hedge funds tracked by Insider Monkey were long this stock, a change of -45% from the second quarter of 2020. By comparison, 3 hedge funds held shares or bullish call options in SONM 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.
More specifically, Nokomis Capital was the largest shareholder of Sonim Technologies, Inc. (NASDAQ:SONM), with a stake worth $1.9 million reported as of the end of September. Trailing Nokomis Capital was Manatuck Hill Partners, which amassed a stake valued at $1.2 million. Harvey Partners, Renaissance Technologies, and Millennium Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Harvey Partners allocated the biggest weight to Sonim Technologies, Inc. (NASDAQ:SONM), around 1.13% of its 13F portfolio. Nokomis Capital is also relatively very bullish on the stock, setting aside 0.9 percent of its 13F equity portfolio to SONM.
Because Sonim Technologies, Inc. (NASDAQ:SONM) has witnessed declining sentiment from the aggregate hedge fund industry, it’s easy to see that there is a sect of funds who were dropping their positions entirely in the third quarter. Intriguingly, J. Carlo Cannell’s Cannell Capital dumped the largest investment of the “upper crust” of funds followed by Insider Monkey, comprising an estimated $0.3 million in stock, and Donald Sussman’s Paloma Partners was right behind this move, as the fund said goodbye to about $0 million worth. These bearish behaviors are important to note, as total hedge fund interest fell by 5 funds in the third quarter.
Let’s go over hedge fund activity in other stocks similar to Sonim Technologies, Inc. (NASDAQ:SONM). We will take a look at Baudax Bio, Inc. (NASDAQ:BXRX), Atlas Technical Consultants, Inc. (NASDAQ:ATCX), Trxade Group, Inc. (NASDAQ:MEDS), Moleculin Biotech, Inc. (NASDAQ:MBRX), IF Bancorp Inc (NASDAQ:IROQ), Kazia Therapeutics Limited (NASDAQ:KZIA), and Synalloy Corporation (NASDAQ:SYNL). All of these stocks’ market caps are similar to SONM’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 4 hedge funds with bullish positions and the average amount invested in these stocks was $4 million. That figure was $5 million in SONM’s case. Atlas Technical Consultants, Inc. (NASDAQ:ATCX) is the most popular stock in this table. On the other hand Kazia Therapeutics Limited (NASDAQ:KZIA) is the least popular one with only 1 bullish hedge fund positions. Sonim Technologies, Inc. (NASDAQ:SONM) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for SONM is 47.6. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 30.7% in 2020 through November 27th and beat the market again by 16.1 percentage points. Unfortunately SONM wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on SONM were disappointed as the stock returned -20.6% since the end of September (through 11/27) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
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Disclosure: None. This article was originally published at Insider Monkey.