Investing in small cap stocks has historically been a way to outperform the market, as small cap companies typically grow faster on average than the blue chips. That outperformance comes with a price, however, as there are occasional periods of higher volatility. The last 8 months is one of those periods, as the Russell 2000 ETF (IWM) has underperformed the larger S&P 500 ETF (SPY) by nearly 9 percentage points. Given that the funds we track tend to have a disproportionate amount of their portfolios in smaller cap stocks, they have seen some volatility in their portfolios too. Actually their moves are potentially one of the factors that contributed to this volatility. In this article, we use our extensive database of hedge fund holdings to find out what the smart money thinks of Sykes Enterprises, Incorporated (NASDAQ:SYKE).
Is Sykes Enterprises, Incorporated (NASDAQ:SYKE) a bargain? Investors who are in the know are taking an optimistic view. The number of bullish hedge fund positions moved up by 1 lately. Our calculations also showed that syke isn’t among the 30 most popular stocks among hedge funds.
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.
We’re going to take a peek at the recent hedge fund action encompassing Sykes Enterprises, Incorporated (NASDAQ:SYKE).
How have hedgies been trading Sykes Enterprises, Incorporated (NASDAQ:SYKE)?
Heading into the second quarter of 2019, a total of 17 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 6% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards SYKE over the last 15 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Sykes Enterprises, Incorporated (NASDAQ:SYKE) was held by Renaissance Technologies, which reported holding $18.1 million worth of stock at the end of March. It was followed by Arrowstreet Capital with a $11.5 million position. Other investors bullish on the company included Intrepid Capital Management, AQR Capital Management, and Citadel Investment Group.
With a general bullishness amongst the heavyweights, key money managers have jumped into Sykes Enterprises, Incorporated (NASDAQ:SYKE) headfirst. Millennium Management, managed by Israel Englander, assembled the largest position in Sykes Enterprises, Incorporated (NASDAQ:SYKE). Millennium Management had $1.3 million invested in the company at the end of the quarter. Paul Tudor Jones’s Tudor Investment Corp also initiated a $0.5 million position during the quarter. The following funds were also among the new SYKE investors: Benjamin A. Smith’s Laurion Capital Management and Andrew Feldstein and Stephen Siderow’s Blue Mountain Capital.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Sykes Enterprises, Incorporated (NASDAQ:SYKE) but similarly valued. These stocks are Gannett Co., Inc. (NYSE:GCI), ePlus Inc. (NASDAQ:PLUS), James River Group Holdings Ltd (NASDAQ:JRVR), and COMSCORE, Inc. (NASDAQ:SCOR). This group of stocks’ market valuations match 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 12.75 hedge funds with bullish positions and the average amount invested in these stocks was $115 million. That figure was $51 million in SYKE’s case. Gannett Co., Inc. (NYSE:GCI) is the most popular stock in this table. On the other hand ePlus Inc. (NASDAQ:PLUS) is the least popular one with only 9 bullish hedge fund positions. Compared to these stocks Sykes Enterprises, Incorporated (NASDAQ:SYKE) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. Unfortunately SYKE wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on SYKE were disappointed as the stock returned -4.2% during the same period 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 13 of these stocks already outperformed the market in Q2.
Disclosure: None. This article was originally published at Insider Monkey.