Russell 2000 ETF (IWM) lagged the larger S&P 500 ETF (SPY) by more than 10 percentage points since the end of the third quarter of 2018 as investors first worried over the possible ramifications of rising interest rates and the escalation of the trade war with China. The hedge funds and institutional investors we track typically invest more in smaller-cap stocks than an average investor (i.e. only about 60% S&P 500 constituents were among the 500 most popular stocks among hedge funds), and we have seen data that shows those funds paring back their overall exposure. Those funds cutting positions in small-caps is one reason why volatility has increased. In the following paragraphs, we take a closer look at what hedge funds and prominent investors think of Symantec Corporation (NASDAQ:SYMC) and see how the stock is affected by the recent hedge fund activity.
Symantec Corporation (NASDAQ:SYMC) investors should pay attention to an increase in hedge fund sentiment of late. SYMC was in 35 hedge funds’ portfolios at the end of June. There were 29 hedge funds in our database with SYMC positions at the end of the previous quarter. Our calculations also showed that SYMC isn’t among the 30 most popular stocks among hedge funds (see the video below).
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 market by 40 percentage points since May 2014 through May 30, 2019 (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 our short portfolio.
Unlike this former hedge fund manager who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We’re going to check out the new hedge fund action encompassing Symantec Corporation (NASDAQ:SYMC).
How are hedge funds trading Symantec Corporation (NASDAQ:SYMC)?
At the end of the second quarter, a total of 35 of the hedge funds tracked by Insider Monkey were long this stock, a change of 21% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards SYMC over the last 16 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to Insider Monkey’s hedge fund database, Starboard Value LP, managed by Jeffrey Smith, holds the largest position in Symantec Corporation (NASDAQ:SYMC). Starboard Value LP has a $826.9 million position in the stock, comprising 25.2% of its 13F portfolio. Coming in second is AQR Capital Management, managed by Cliff Asness, which holds a $151.4 million position; the fund has 0.2% of its 13F portfolio invested in the stock. Remaining members of the smart money that hold long positions contain D. E. Shaw’s D E Shaw, John Overdeck and David Siegel’s Two Sigma Advisors and George Soros’s Soros Fund Management.
Consequently, key money managers were breaking ground themselves. Soros Fund Management, managed by George Soros, assembled the most outsized position in Symantec Corporation (NASDAQ:SYMC). Soros Fund Management had $40.4 million invested in the company at the end of the quarter. Clint Carlson’s Carlson Capital also initiated a $20.9 million position during the quarter. The following funds were also among the new SYMC investors: Ian Simm’s Impax Asset Management, Marc Majzner’s Clearline Capital, and Michael Kharitonov and Jon David McAuliffe’s Voleon Capital.
Let’s go over hedge fund activity in other stocks similar to Symantec Corporation (NASDAQ:SYMC). These stocks are Paycom Software Inc (NYSE:PAYC), DENTSPLY SIRONA Inc. (NASDAQ:XRAY), Celanese Corporation (NYSE:CE), and Erie Indemnity Company (NASDAQ:ERIE). All of these stocks’ market caps are closest to SYMC’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 21.25 hedge funds with bullish positions and the average amount invested in these stocks was $836 million. That figure was $1342 million in SYMC’s case. DENTSPLY SIRONA Inc. (NASDAQ:XRAY) is the most popular stock in this table. On the other hand Erie Indemnity Company (NASDAQ:ERIE) is the least popular one with only 12 bullish hedge fund positions. Compared to these stocks Symantec Corporation (NASDAQ:SYMC) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Hedge funds were also right about betting on SYMC as the stock returned 8.9% during Q3 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.
Disclosure: None. This article was originally published at Insider Monkey.