At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Sykes Enterprises, Incorporated (NASDAQ:SYKE).
Is Sykes Enterprises, Incorporated (NASDAQ:SYKE) the right pick for your portfolio? The smart money is taking a pessimistic view. The number of long hedge fund bets shrunk by 4 lately. Our calculations also showed that SYKE isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks). SYKE was in 14 hedge funds’ portfolios at the end of March. There were 18 hedge funds in our database with SYKE holdings at the end of the previous quarter.
Video: Watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, blockchain technology’s influence will go beyond online payments. So, we are checking out this futurist’s moonshot opportunities in tech stocks. We interview hedge fund managers and ask them about their best ideas. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we’re going to analyze the key hedge fund action surrounding Sykes Enterprises, Incorporated (NASDAQ:SYKE).
Hedge fund activity in Sykes Enterprises, Incorporated (NASDAQ:SYKE)
At Q1’s end, a total of 14 of the hedge funds tracked by Insider Monkey were long this stock, a change of -22% from one quarter earlier. On the other hand, there were a total of 17 hedge funds with a bullish position in SYKE a year ago. With hedge funds’ sentiment swirling, there exists a few noteworthy hedge fund managers who were adding to their stakes meaningfully (or already accumulated large positions).
More specifically, Pzena Investment Management was the largest shareholder of Sykes Enterprises, Incorporated (NASDAQ:SYKE), with a stake worth $16.7 million reported as of the end of September. Trailing Pzena Investment Management was Renaissance Technologies, which amassed a stake valued at $15.9 million. Arrowstreet Capital, AQR Capital Management, and Intrepid Capital Management 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 Intrepid Capital Management allocated the biggest weight to Sykes Enterprises, Incorporated (NASDAQ:SYKE), around 1.03% of its 13F portfolio. Zebra Capital Management is also relatively very bullish on the stock, dishing out 0.79 percent of its 13F equity portfolio to SYKE.
Seeing as Sykes Enterprises, Incorporated (NASDAQ:SYKE) has witnessed declining sentiment from hedge fund managers, logic holds that there was a specific group of money managers who sold off their entire stakes by the end of the first quarter. At the top of the heap, Matthew Hulsizer’s PEAK6 Capital Management said goodbye to the biggest stake of all the hedgies monitored by Insider Monkey, totaling about $0.4 million in stock, and Joel Greenblatt’s Gotham Asset Management was right behind this move, as the fund said goodbye to about $0.3 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest fell by 4 funds by the end of the first quarter.
Let’s check out hedge fund activity in other stocks similar to Sykes Enterprises, Incorporated (NASDAQ:SYKE). We will take a look at Inogen Inc (NASDAQ:INGN), DHT Holdings Inc (NYSE:DHT), Arcutis Biotherapeutics, Inc. (NASDAQ:ARQT), and Eldorado Resorts Inc (NASDAQ:ERI). This group of stocks’ market valuations are closest to SYKE’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 23.25 hedge funds with bullish positions and the average amount invested in these stocks was $289 million. That figure was $56 million in SYKE’s case. Eldorado Resorts Inc (NASDAQ:ERI) is the most popular stock in this table. On the other hand Arcutis Biotherapeutics, Inc. (NASDAQ:ARQT) is the least popular one with only 8 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. 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 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 13.3% in 2020 through June 25th and surpassed the market by 16.8 percentage points. Unfortunately SYKE wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); SYKE investors were disappointed as the stock returned -2.3% during the second 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 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
Disclosure: None. This article was originally published at Insider Monkey.