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Hedge Funds Turned Their Back On Sonim Technologies, Inc. (SONM)

Is Sonim Technologies, Inc. (NASDAQ:SONM) a good equity to bet on right now? We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It’s not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.

Sonim Technologies, Inc. (NASDAQ:SONM) was in 3 hedge funds’ portfolios at the end of the third quarter of 2019. SONM has experienced a decrease in enthusiasm from smart money lately. There were 8 hedge funds in our database with SONM positions at the end of the previous quarter. Our calculations also showed that SONM isn’t among the 30 most popular stocks among hedge funds.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 91% since May 2014 and outperformed the Russell 2000 ETFs by nearly 40 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

MILLENNIUM MANAGEMENT

Israel Englander of Millennium Management

Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world’s most bearish hedge fund that’s more convinced than ever that a crash is coming, our long-short investment strategy doesn’t rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds‘ buy/sell signals. Let’s take a look at the key hedge fund action surrounding Sonim Technologies, Inc. (NASDAQ:SONM).

Hedge fund activity in Sonim Technologies, Inc. (NASDAQ:SONM)

At Q3’s end, a total of 3 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -63% from the previous quarter. On the other hand, there were a total of 0 hedge funds with a bullish position in SONM a year ago. With the smart money’s positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were boosting their stakes significantly (or already accumulated large positions).

SONM_nov2019

More specifically, Nokomis Capital was the largest shareholder of Sonim Technologies, Inc. (NASDAQ:SONM), with a stake worth $10.8 million reported as of the end of September. Trailing Nokomis Capital was Park West Asset Management, which amassed a stake valued at $0.3 million. Millennium Management was 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 Nokomis Capital allocated the biggest weight to Sonim Technologies, Inc. (NASDAQ:SONM), around 2.34% of its portfolio. Park West Asset Management is also relatively very bullish on the stock, setting aside 0.01 percent of its 13F equity portfolio to SONM.

Seeing as Sonim Technologies, Inc. (NASDAQ:SONM) has faced a decline in interest from the entirety of the hedge funds we track, it’s safe to say that there were a few funds that elected to cut their entire stakes in the third quarter. Interestingly, J. Carlo Cannell’s Cannell Capital dumped the biggest stake of all the hedgies watched by Insider Monkey, comprising an estimated $6.4 million in stock. Richard Driehaus’s fund, Driehaus Capital, also said goodbye to its stock, about $5.2 million worth. These transactions are interesting, as aggregate hedge fund interest was cut by 5 funds in the third quarter.

Let’s check out hedge fund activity in other stocks similar to Sonim Technologies, Inc. (NASDAQ:SONM). These stocks are Virco Mfg. Corporation (NASDAQ:VIRC), Verona Pharma plc (NASDAQ:VRNA), Patriot Transportation Holding Inc (NASDAQ:PATI), and Merrimack Pharmaceuticals Inc (NASDAQ:MACK). This group of stocks’ market caps match SONM’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
VIRC 3 5656 0
VRNA 3 12994 -1
PATI 3 8659 0
MACK 4 8753 -1
Average 3.25 9016 -0.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 3.25 hedge funds with bullish positions and the average amount invested in these stocks was $9 million. That figure was $11 million in SONM’s case. Merrimack Pharmaceuticals Inc (NASDAQ:MACK) is the most popular stock in this table. On the other hand Virco Mfg. Corporation (NASDAQ:VIRC) is the least popular one with only 3 bullish hedge fund positions. Compared to these stocks Sonim Technologies, Inc. (NASDAQ:SONM) is even less popular than VIRC. Hedge funds dodged a bullet by taking a bearish stance towards SONM. Our calculations showed that the top 20 most popular hedge fund stocks returned 34.7% in 2019 through November 22nd and outperformed the S&P 500 ETF (SPY) by 8.5 percentage points. Unfortunately SONM wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); SONM investors were disappointed as the stock returned -17.7% during the fourth quarter (through 11/22) 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 70 percent of these stocks already outperformed the market so far in Q4.

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

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