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Hedge Funds Never Loved Switch, Inc. (SWCH) More

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 Switch, Inc. (NYSE:SWCH).

Switch, Inc. (NYSE:SWCH) has experienced an increase in support from the world’s most elite money managers of late. Our calculations also showed that SWCH 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.

Today there are a lot of indicators stock market investors use to assess their holdings. A couple of the most useful indicators are hedge fund and insider trading interest. We have shown that, historically, those who follow the best picks of the elite hedge fund managers can outperform the S&P 500 by a healthy amount (see the details here).

Bruce Kovner, Caxton Associates LP

Bruce Kovner of Caxton Associates LP

We leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like these. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we’re going to take a gander at the new hedge fund action surrounding Switch, Inc. (NYSE:SWCH).

What does smart money think about Switch, Inc. (NYSE:SWCH)?

Heading into the second quarter of 2020, a total of 24 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 33% from the previous quarter. By comparison, 16 hedge funds held shares or bullish call options in SWCH 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.

The largest stake in Switch, Inc. (NYSE:SWCH) was held by Sylebra Capital Management, which reported holding $132.4 million worth of stock at the end of September. It was followed by Renaissance Technologies with a $107.5 million position. Other investors bullish on the company included Rima Senvest Management, Echo Street Capital Management, and Intrinsic Edge Capital. In terms of the portfolio weights assigned to each position Blue Grotto Capital allocated the biggest weight to Switch, Inc. (NYSE:SWCH), around 6.61% of its 13F portfolio. Rima Senvest Management is also relatively very bullish on the stock, earmarking 5.69 percent of its 13F equity portfolio to SWCH.

As industrywide interest jumped, key money managers have jumped into Switch, Inc. (NYSE:SWCH) headfirst. Echo Street Capital Management, managed by Greg Poole, assembled the most outsized position in Switch, Inc. (NYSE:SWCH). Echo Street Capital Management had $27.7 million invested in the company at the end of the quarter. Mark Coe’s Intrinsic Edge Capital also initiated a $16.8 million position during the quarter. The following funds were also among the new SWCH investors: Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Bruce Kovner’s Caxton Associates LP, and Greg Eisner’s Engineers Gate Manager.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Switch, Inc. (NYSE:SWCH) but similarly valued. These stocks are TCF Financial Corporation (NASDAQ:TCF), Emcor Group Inc (NYSE:EME), Ormat Technologies, Inc. (NYSE:ORA), and Schneider National, Inc. (NYSE:SNDR). This group of stocks’ market caps match SWCH’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
TCF 19 100615 -5
EME 24 201184 -5
ORA 9 164907 -7
SNDR 22 66577 0
Average 18.5 133321 -4.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 18.5 hedge funds with bullish positions and the average amount invested in these stocks was $133 million. That figure was $394 million in SWCH’s case. Emcor Group Inc (NYSE:EME) is the most popular stock in this table. On the other hand Ormat Technologies, Inc. (NYSE:ORA) is the least popular one with only 9 bullish hedge fund positions. Switch, Inc. (NYSE:SWCH) is not the most popular stock in this group but hedge fund interest is still above average. 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 13.9% in 2020 through June 10th but still beat the market by 14.2 percentage points. Hedge funds were also right about betting on SWCH, though not to the same extent, as the stock returned 23.8% during the first two months and ten days of the second quarter and outperformed the market as well.

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