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Hedge Fund Sentiment Is Stagnant On SLM Corp (SLM)

It is already common knowledge that individual investors do not usually have the necessary resources and abilities to properly research an investment opportunity. As a result, most investors pick their illusory “winners” by making a superficial analysis and research that leads to poor performance on aggregate. Since stock returns aren’t usually symmetrically distributed and index returns are more affected by a few outlier stocks (i.e. the FAANG stocks dominating and driving S&P 500 Index’s returns in recent years), more than 50% of the constituents of the Standard and Poor’s 500 Index underperform the benchmark. Hence, if you randomly pick a stock, there is more than 50% chance that you’d fail to beat the market. At the same time, the 30 most favored S&P 500 stocks by the hedge funds monitored by Insider Monkey generated a return of 15.1% over the last 12 months (vs. 5.6% gain for SPY), with 53% of these stocks outperforming the benchmark. Of course, hedge funds do make wrong bets on some occasions and these get disproportionately publicized on financial media, but piggybacking their moves can beat the broader market on average. That’s why we are going to go over recent hedge fund activity in SLM Corp (NASDAQ:SLM).

Hedge fund interest in SLM Corp (NASDAQ:SLM) shares was flat at the end of last quarter. This is usually a negative indicator. At the end of this article we will also compare SLM to other stocks including Prosperity Bancshares, Inc. (NYSE:PB), Amarin Corporation plc (NASDAQ:AMRN), and Axis Capital Holdings Limited (NYSE:AXS) to get a better sense of its popularity.

Today there are many gauges shareholders can use to value publicly traded companies. A couple of the most useful gauges are hedge fund and insider trading signals. We have shown that, historically, those who follow the best picks of the elite investment managers can outpace the market by a healthy amount (see the details here).

VALUEACT CAPITAL

We’re going to check out the fresh hedge fund action regarding SLM Corp (NASDAQ:SLM).

How are hedge funds trading SLM Corp (NASDAQ:SLM)?

At Q3’s end, a total of 19 of the hedge funds tracked by Insider Monkey held long positions in this stock, no change from the second quarter of 2018. Below, you can check out the change in hedge fund sentiment towards SLM over the last 13 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

SLM_dec2018

The largest stake in SLM Corp (NASDAQ:SLM) was held by ValueAct Capital, which reported holding $436.9 million worth of stock at the end of September. It was followed by Citadel Investment Group with a $43.9 million position. Other investors bullish on the company included Portolan Capital Management, Selz Capital, and Point72 Asset Management.

Because SLM Corp (NASDAQ:SLM) has faced bearish sentiment from the aggregate hedge fund industry, it’s easy to see that there were a few hedgies who were dropping their full holdings by the end of the third quarter. Interestingly, Anand Parekh’s Alyeska Investment Group dumped the biggest investment of the 700 funds followed by Insider Monkey, valued at close to $10.6 million in stock, and Matthew Hulsizer’s PEAK6 Capital Management was right behind this move, as the fund dumped about $1.2 million worth. These transactions are interesting, as total hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s also examine hedge fund activity in other stocks similar to SLM Corp (NASDAQ:SLM). We will take a look at Prosperity Bancshares, Inc. (NYSE:PB), Amarin Corporation plc (NASDAQ:AMRN), Axis Capital Holdings Limited (NYSE:AXS), and InterXion Holding NV (NYSE:INXN). All of these stocks’ market caps are closest to SLM’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
PB 6 73671 -4
AMRN 22 1152232 7
AXS 21 597310 -3
INXN 31 803781 -4
Average 20 656749 -1

View table here if you experience formatting issues.

As you can see these stocks had an average of 20 hedge funds with bullish positions and the average amount invested in these stocks was $657 million. That figure was $597 million in SLM’s case. InterXion Holding NV (NYSE:INXN) is the most popular stock in this table. On the other hand Prosperity Bancshares, Inc. (NYSE:PB) is the least popular one with only 6 bullish hedge fund positions. SLM Corp (NASDAQ:SLM) 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 INXN might be a better candidate to consider a long position.

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

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