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Hedge Funds Are Coming Back To Sykes Enterprises, Incorporated (SYKE)

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the second quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 5 years and analyze what the smart money thinks of Sykes Enterprises, Incorporated (NASDAQ:SYKE) based on that data and determine whether they were really smart about the stock.

Sykes Enterprises, Incorporated (NASDAQ:SYKE) has experienced an increase in support from the world’s most elite money managers recently. Sykes Enterprises, Incorporated (NASDAQ:SYKE) was in 18 hedge funds’ portfolios at the end of June. The all time high for this statistics is 18. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. There were 14 hedge funds in our database with SYKE positions at the end of the first quarter. Our calculations also showed that SYKE isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks).

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

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. 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 S&P 500 ETFs by 58 percentage points since March 2017 (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.

Bruce Kovner, Caxton Associates LP

Bruce Kovner of Caxton Associates LP

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 are checking out this junior gold mining stock and we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 10 most profitable companies in the world 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 to get excerpts of these letters in your inbox. With all of this in mind we’re going to check out the new hedge fund action regarding Sykes Enterprises, Incorporated (NASDAQ:SYKE).

What does smart money think about Sykes Enterprises, Incorporated (NASDAQ:SYKE)?

At the end of June, a total of 18 of the hedge funds tracked by Insider Monkey were long this stock, a change of 29% from one quarter earlier. On the other hand, there were a total of 15 hedge funds with a bullish position in SYKE 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.

Is SYKE A Good Stock To Buy?

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Renaissance Technologies,  holds the largest position in Sykes Enterprises, Incorporated (NASDAQ:SYKE). Renaissance Technologies has a $14.3 million position in the stock, comprising less than 0.1%% of its 13F portfolio. On Renaissance Technologies’s heels is Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, which holds a $13 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Other professional money managers that hold long positions include Cliff Asness’s AQR Capital Management, Richard S. Pzena’s Pzena Investment Management and Ken Griffin’s Citadel Investment Group. In terms of the portfolio weights assigned to each position Intrepid Capital Management allocated the biggest weight to Sykes Enterprises, Incorporated (NASDAQ:SYKE), around 0.7% of its 13F portfolio. Zebra Capital Management is also relatively very bullish on the stock, dishing out 0.66 percent of its 13F equity portfolio to SYKE.

Now, key hedge funds were leading the bulls’ herd. ExodusPoint Capital, managed by Michael Gelband, initiated the most valuable position in Sykes Enterprises, Incorporated (NASDAQ:SYKE). ExodusPoint Capital had $0.6 million invested in the company at the end of the quarter. Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors also initiated a $0.4 million position during the quarter. The other funds with brand new SYKE positions are Bruce Kovner’s Caxton Associates LP, Donald Sussman’s Paloma Partners, and Thomas Bailard’s Bailard Inc.

Let’s now review hedge fund activity in other stocks similar to Sykes Enterprises, Incorporated (NASDAQ:SYKE). These stocks are Atlas Air Worldwide Holdings, Inc. (NASDAQ:AAWW), Athenex, Inc. (NASDAQ:ATNX), Acadia Realty Trust (NYSE:AKR), K12 Inc. (NYSE:LRN), Cadence Bancorporation (NYSE:CADE), Pliant Therapeutics, Inc. (NASDAQ:PLRX), and The RealReal, Inc. (NASDAQ:REAL). This group of stocks’ market valuations resemble SYKE’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
AAWW 26 199489 9
ATNX 18 337012 3
AKR 16 49134 2
LRN 18 157534 -2
CADE 21 109996 -8
PLRX 13 241772 13
REAL 19 201408 4
Average 18.7 185192 3

View table here if you experience formatting issues.

As you can see these stocks had an average of 18.7 hedge funds with bullish positions and the average amount invested in these stocks was $185 million. That figure was $46 million in SYKE’s case. Atlas Air Worldwide Holdings, Inc. (NASDAQ:AAWW) is the most popular stock in this table. On the other hand Pliant Therapeutics, Inc. (NASDAQ:PLRX) is the least popular one with only 13 bullish hedge fund positions. Sykes Enterprises, Incorporated (NASDAQ:SYKE) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for SYKE is 58.2. 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. 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 gained 24.8% in 2020 through the end of September and still beat the market by 19.3 percentage points. A small number of hedge funds were also right about betting on SYKE as the stock returned 23.7% in the third quarter and outperformed the market by an even larger margin.

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