It is already common knowledge that individual investors do not usually have the necessary resources and abilities to properly research an investment opportunity. As a result, most investors pick their illusory “winners” by making a superficial analysis and research that leads to poor performance on aggregate. Since stock returns aren’t usually symmetrically distributed and index returns are more affected by a few outlier stocks (i.e. the FAANG stocks dominating and driving S&P 500 Index’s returns in recent years), more than 50% of the constituents of the Standard and Poor’s 500 Index underperform the benchmark. Hence, if you randomly pick a stock, there is more than 50% chance that you’d fail to beat the market. At the same time, the 15 most favored S&P 500 stocks by the hedge funds monitored by Insider Monkey generated a return of 19.7% during the first 2.5 months of 2019 (vs. 13.1% gain for SPY), with 93% of these stocks outperforming the benchmark. Of course, hedge funds do make wrong bets on some occasions and these get disproportionately publicized on financial media, but piggybacking their moves can beat the broader market on average. That’s why we are going to go over recent hedge fund activity in SLM Corp (NASDAQ:SLM).
SLM Corp (NASDAQ:SLM) has seen an increase in activity from the world’s largest hedge funds in recent months. Our calculations also showed that SLM isn’t among the 30 most popular stocks among hedge funds.
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 market by 32 percentage points since May 2014 through March 12, 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.
Let’s view the latest hedge fund action encompassing SLM Corp (NASDAQ:SLM).
How have hedgies been trading SLM Corp (NASDAQ:SLM)?
At the end of the fourth quarter, a total of 24 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 26% from one quarter earlier. By comparison, 16 hedge funds held shares or bullish call options in SLM 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.
Among these funds, ValueAct Capital held the most valuable stake in SLM Corp (NASDAQ:SLM), which was worth $325.6 million at the end of the third quarter. On the second spot was Carlson Capital which amassed $40 million worth of shares. Moreover, Portolan Capital Management, Point72 Asset Management, and Renaissance Technologies were also bullish on SLM Corp (NASDAQ:SLM), allocating a large percentage of their portfolios to this stock.
Now, some big names were breaking ground themselves. Carlson Capital, managed by Clint Carlson, assembled the most valuable position in SLM Corp (NASDAQ:SLM). Carlson Capital had $40 million invested in the company at the end of the quarter. Paul Marshall and Ian Wace’s Marshall Wace LLP also initiated a $4.2 million position during the quarter. The other funds with brand new SLM positions are Michael Kharitonov and Jon David McAuliffe’s Voleon Capital, George Zweig, Shane Haas and Ravi Chander’s Signition LP, and Phil Frohlich’s Prescott Group Capital Management.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as SLM Corp (NASDAQ:SLM) but similarly valued. These stocks are Vipshop Holdings Limited (NYSE:VIPS), Skechers USA Inc (NYSE:SKX), Brighthouse Financial, Inc. (NASDAQ:BHF), and Esterline Technologies Corporation (NYSE:ESL). All of these stocks’ market caps resemble SLM’s market cap.
|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 24.75 hedge funds with bullish positions and the average amount invested in these stocks was $332 million. That figure was $493 million in SLM’s case. Esterline Technologies Corporation (NYSE:ESL) is the most popular stock in this table. On the other hand Vipshop Holdings Limited (NYSE:VIPS) is the least popular one with only 22 bullish hedge fund positions. SLM Corp (NASDAQ:SLM) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. A small number of hedge funds were also right about betting on SLM, though not to the same extent, as the stock returned 18.6% and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.