While the market driven by short-term sentiment influenced by the accommodative interest rate environment in the US, virus news and stimulus spending, many smart money investors are starting to get cautious towards the current bull run since March, 2020 and hedging or reducing many of their long positions. Some fund managers are betting on Dow hitting 40,000 to generate strong returns. However, as we know, big investors usually buy stocks with strong fundamentals that can deliver gains both in bull and bear markets, which is why we believe we can profit from imitating them. In this article, we are going to take a look at the smart money sentiment surrounding SCVX Corp. (NYSE:SCVX).
Is SCVX Corp. (NYSE:SCVX) a cheap investment right now? Investors who are in the know were becoming more confident. The number of bullish hedge fund positions went up by 9 recently. SCVX Corp. (NYSE:SCVX) was in 26 hedge funds’ portfolios at the end of the first quarter of 2021. The all time high for this statistic is 17. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that SCVX isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings). There were 17 hedge funds in our database with SCVX positions at the end of the fourth quarter.
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 115 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.
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, economists warn of inflation flare up. So, we are checking out this backdoor gold play that has hit peak gains of 718% in a little over a year. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. Now let’s go over the latest hedge fund action encompassing SCVX Corp. (NYSE:SCVX).
Do Hedge Funds Think SCVX Is A Good Stock To Buy Now?
At the end of the first quarter, a total of 26 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 53% from the fourth quarter of 2020. Below, you can check out the change in hedge fund sentiment towards SCVX over the last 23 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Hudson Bay Capital Management was the largest shareholder of SCVX Corp. (NYSE:SCVX), with a stake worth $23.4 million reported as of the end of March. Trailing Hudson Bay Capital Management was Magnetar Capital, which amassed a stake valued at $11.2 million. HBK Investments, Millennium Management, and Aristeia 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 Fort Baker Capital Management allocated the biggest weight to SCVX Corp. (NYSE:SCVX), around 0.92% of its 13F portfolio. Hudson Bay Capital Management is also relatively very bullish on the stock, setting aside 0.29 percent of its 13F equity portfolio to SCVX.
As aggregate interest increased, key money managers were breaking ground themselves. Saba Capital, managed by Boaz Weinstein, established the biggest position in SCVX Corp. (NYSE:SCVX). Saba Capital had $2.4 million invested in the company at the end of the quarter. Daniel S. Och’s OZ Management also initiated a $1.9 million position during the quarter. The other funds with brand new SCVX positions are D. E. Shaw’s D E Shaw, Gavin Saitowitz and Cisco J. del Valle’s Prelude Capital (previously Springbok Capital), and Orkun Kilic’s Berry Street Capital.
Let’s also examine hedge fund activity in other stocks similar to SCVX Corp. (NYSE:SCVX). These stocks are Decibel Therapeutics, Inc. (NASDAQ:DBTX), Orbital Energy Group, Inc. (NASDAQ:OEG), Full House Resorts, Inc. (NASDAQ:FLL), Daktronics, Inc. (NASDAQ:DAKT), CECO Environmental Corp. (NASDAQ:CECE), Horizon Global Corp (NYSE:HZN), and Ruhnn Holding Limited (NASDAQ:RUHN). This group of stocks’ market valuations resemble SCVX’s market valuation.
|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 10.7 hedge funds with bullish positions and the average amount invested in these stocks was $43 million. That figure was $90 million in SCVX’s case. Full House Resorts, Inc. (NASDAQ:FLL) is the most popular stock in this table. On the other hand Ruhnn Holding Limited (NASDAQ:RUHN) is the least popular one with only 3 bullish hedge fund positions. Compared to these stocks SCVX Corp. (NYSE:SCVX) is more popular among hedge funds. Our overall hedge fund sentiment score for SCVX is 90. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 24% in 2021 through July 9th and still beat the market by 6.7 percentage points. Unfortunately SCVX wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on SCVX were disappointed as the stock returned 0.4% since the end of the first quarter (through 7/9) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market since 2019.
Follow Scvx Corp. (NYSE:SCVX)
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Disclosure: None. This article was originally published at Insider Monkey.