Hedge funds are not perfect. They have their bad picks just like everyone else. Facebook, a stock hedge funds have loved dearly, lost nearly 40% of its value at one point in 2018. Although hedge funds are not perfect, their consensus picks do deliver solid returns, however. Our data show the top 20 S&P 500 stocks among hedge funds beat the S&P 500 Index by nearly 10 percentage points so far in 2019. Because hedge funds have a lot of resources and their consensus picks do well, we pay attention to what they think. In this article, we analyze what the elite funds think of Sanmina Corporation (NASDAQ:SANM).
Is Sanmina Corporation (NASDAQ:SANM) ready to rally soon? Money managers are becoming hopeful. The number of bullish hedge fund bets moved up by 2 lately. Our calculations also showed that SANM isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). SANM was in 20 hedge funds’ portfolios at the end of the third quarter of 2019. There were 18 hedge funds in our database with SANM holdings at the end of the previous quarter.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
Ric Dillon of Diamond Hill Capital
Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world’s most bearish hedge fund that’s more convinced than ever that a crash is coming, our long-short investment strategy doesn’t rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds‘ buy/sell signals. Let’s analyze the new hedge fund action surrounding Sanmina Corporation (NASDAQ:SANM).
Hedge fund activity in Sanmina Corporation (NASDAQ:SANM)
At Q3’s end, a total of 20 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 11% from the previous quarter. The graph below displays the number of hedge funds with bullish position in SANM over the last 17 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists an “upper tier” of notable hedge fund managers who were increasing their holdings substantially (or already accumulated large positions).
More specifically, Diamond Hill Capital was the largest shareholder of Sanmina Corporation (NASDAQ:SANM), with a stake worth $89.6 million reported as of the end of September. Trailing Diamond Hill Capital was Renaissance Technologies, which amassed a stake valued at $37.9 million. D E Shaw, Royce & Associates, and Arrowstreet Capital 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 Diamond Hill Capital allocated the biggest weight to Sanmina Corporation (NASDAQ:SANM), around 0.48% of its 13F portfolio. Quantinno Capital is also relatively very bullish on the stock, dishing out 0.22 percent of its 13F equity portfolio to SANM.
With a general bullishness amongst the heavyweights, specific money managers have jumped into Sanmina Corporation (NASDAQ:SANM) headfirst. Holocene Advisors, managed by Brandon Haley, initiated the most valuable position in Sanmina Corporation (NASDAQ:SANM). Holocene Advisors had $0.5 million invested in the company at the end of the quarter. Matthew Hulsizer’s PEAK6 Capital Management also made a $0.4 million investment in the stock during the quarter. The only other fund with a new position in the stock is Minhua Zhang’s Weld Capital Management.
Let’s now review hedge fund activity in other stocks similar to Sanmina Corporation (NASDAQ:SANM). These stocks are Franklin Electric Co., Inc. (NASDAQ:FELE), Hilltop Holdings Inc. (NYSE:HTH), Rapid7 Inc (NASDAQ:RPD), and Genworth Financial Inc (NYSE:GNW). This group of stocks’ market valuations match SANM’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| FELE | 11 | 216330 | -3 |
| HTH | 19 | 94682 | 1 |
| RPD | 23 | 227036 | -2 |
| GNW | 29 | 266769 | 7 |
| Average | 20.5 | 201204 | 0.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 20.5 hedge funds with bullish positions and the average amount invested in these stocks was $201 million. That figure was $212 million in SANM’s case. Genworth Financial Inc (NYSE:GNW) is the most popular stock in this table. On the other hand Franklin Electric Co., Inc. (NASDAQ:FELE) is the least popular one with only 11 bullish hedge fund positions. Sanmina Corporation (NASDAQ:SANM) 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. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately SANM wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); SANM investors were disappointed as the stock returned -0.9% during the first two months of the fourth quarter 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 70 percent of these stocks already outperformed the market in Q4.
Disclosure: None. This article was originally published at Insider Monkey.
