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Hedge Funds Have Never Been This Bullish On SeaChange International, Inc. (SEAC)

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. Insider Monkey finished processing 821 13F filings submitted by hedge funds and prominent investors. These filings show these funds’ portfolio positions as of March 31st, 2020. What do these smart investors think about SeaChange International, Inc. (NASDAQ:SEAC)?

SeaChange International, Inc. (NASDAQ:SEAC) has experienced an increase in activity from the world’s largest hedge funds recently. SEAC was in 14 hedge funds’ portfolios at the end of March. There were 12 hedge funds in our database with SEAC holdings at the end of the previous quarter. Our calculations also showed that SEAC 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).

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.

Ken Griffin

Ken Griffin of Citadel Investment Group

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, we take a look at lists like the 10 easiest car rental companies to identify emerging trends that are likely to lead to 1000% gains in the coming years. 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. Keeping this in mind we’re going to take a peek at the fresh hedge fund action regarding SeaChange International, Inc. (NASDAQ:SEAC).

How are hedge funds trading SeaChange International, Inc. (NASDAQ:SEAC)?

At the end of the first quarter, a total of 14 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 17% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards SEAC over the last 18 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Renaissance Technologies held the most valuable stake in SeaChange International, Inc. (NASDAQ:SEAC), which was worth $4.5 million at the end of the third quarter. On the second spot was Arrowstreet Capital which amassed $1.4 million worth of shares. Millennium Management, Roumell Asset Management, and Citadel Investment Group 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 Roumell Asset Management allocated the biggest weight to SeaChange International, Inc. (NASDAQ:SEAC), around 3.4% of its 13F portfolio. Diametric Capital is also relatively very bullish on the stock, setting aside 0.37 percent of its 13F equity portfolio to SEAC.

As one would reasonably expect, key money managers have been driving this bullishness. Roumell Asset Management, managed by Jim Roumell, established the most outsized position in SeaChange International, Inc. (NASDAQ:SEAC). Roumell Asset Management had $1.2 million invested in the company at the end of the quarter. Nick Thakore’s Diametric Capital also made a $0.3 million investment in the stock during the quarter. The other funds with brand new SEAC positions are Thomas E. Claugus’s GMT Capital, Greg Eisner’s Engineers Gate Manager, and D. E. Shaw’s D E Shaw.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as SeaChange International, Inc. (NASDAQ:SEAC) but similarly valued. We will take a look at MasterCraft Boat Holdings, Inc. (NASDAQ:MCFT), Tortoise Energy Infrastructure Corporation (NYSE:TYG), Richmond Mutual Bancorporation, Inc. (NASDAQ:RMBI), and Taiwan Liposome Company, Ltd. (NASDAQ:TLC). This group of stocks’ market valuations are closest to SEAC’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
MCFT 20 54690 2
TYG 2 533 1
RMBI 5 3065 1
TLC 1 308 -1
Average 7 14649 0.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 7 hedge funds with bullish positions and the average amount invested in these stocks was $15 million. That figure was $11 million in SEAC’s case. MasterCraft Boat Holdings, Inc. (NASDAQ:MCFT) is the most popular stock in this table. On the other hand Taiwan Liposome Company, Ltd. (NASDAQ:TLC) is the least popular one with only 1 bullish hedge fund positions. SeaChange International, Inc. (NASDAQ:SEAC) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but 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 but beat the market by 16.8 percentage points. Unfortunately SEAC wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on SEAC were disappointed as the stock returned -59.1% during the same time 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 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.

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

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