Here is What Hedge Funds Think About SMART Global Holdings, Inc. (SGH)

We at Insider Monkey have gone over 821 13F filings that hedge funds and prominent investors are required to file by the SEC The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, near the height of the coronavirus market crash. In this article, we look at what those funds think of SMART Global Holdings, Inc. (NASDAQ:SGH) based on that data.

SMART Global Holdings, Inc. (NASDAQ:SGH) was in 17 hedge funds’ portfolios at the end of the first quarter of 2020. SGH investors should pay attention to a decrease in activity from the world’s largest hedge funds lately. There were 18 hedge funds in our database with SGH positions at the end of the previous quarter. Our calculations also showed that SGH 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.

To most investors, hedge funds are perceived as slow, old investment vehicles of the past. While there are more than 8000 funds trading today, We choose to focus on the top tier of this group, about 850 funds. These investment experts have their hands on the majority of the smart money’s total capital, and by observing their highest performing investments, Insider Monkey has brought to light a few investment strategies that have historically defeated Mr. Market. Insider Monkey’s flagship short hedge fund strategy beat the S&P 500 short ETFs by around 20 percentage points per year since its inception in March 2017. Our portfolio of short stocks lost 36% since February 2017 (through May 18th) even though the market was up 30% during the same period. We just shared a list of 8 short targets in our latest quarterly update .

Michael Stark Crosslink Capital

Michael Stark of Crosslink Capital

We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. 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 look at the recent hedge fund action surrounding SMART Global Holdings, Inc. (NASDAQ:SGH).

What does smart money think about SMART Global Holdings, Inc. (NASDAQ:SGH)?

At the end of the first quarter, a total of 17 of the hedge funds tracked by Insider Monkey were long this stock, a change of -6% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in SGH 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, Silver Lake Partners held the most valuable stake in SMART Global Holdings, Inc. (NASDAQ:SGH), which was worth $224.9 million at the end of the third quarter. On the second spot was Crosslink Capital which amassed $14 million worth of shares. Arrowstreet Capital, AQR Capital Management, and Two Sigma Advisors 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 Silver Lake Partners allocated the biggest weight to SMART Global Holdings, Inc. (NASDAQ:SGH), around 6.67% of its 13F portfolio. Crosslink Capital is also relatively very bullish on the stock, designating 4.04 percent of its 13F equity portfolio to SGH.

Seeing as SMART Global Holdings, Inc. (NASDAQ:SGH) has experienced a decline in interest from the smart money, it’s safe to say that there is a sect of hedge funds that slashed their positions entirely heading into Q4. At the top of the heap, Richard Driehaus’s Driehaus Capital dumped the biggest investment of all the hedgies tracked by Insider Monkey, valued at an estimated $16.2 million in stock. Renaissance Technologies, also cut its stock, about $3.5 million worth. These bearish behaviors are interesting, as total hedge fund interest was cut by 1 funds heading into Q4.

Let’s now take a look at hedge fund activity in other stocks similar to SMART Global Holdings, Inc. (NASDAQ:SGH). These stocks are Linx S.A. (NYSE:LINX), Range Resources Corp. (NYSE:RRC), Revlon Inc (NYSE:REV), and Kforce Inc. (NASDAQ:KFRC). This group of stocks’ market caps are closest to SGH’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
LINX 5 11501 1
RRC 23 154075 -6
REV 36 178239 -2
KFRC 15 46137 -7
Average 19.75 97488 -3.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 19.75 hedge funds with bullish positions and the average amount invested in these stocks was $97 million. That figure was $264 million in SGH’s case. Revlon Inc (NYSE:REV) is the most popular stock in this table. On the other hand Linx S.A. (NYSE:LINX) is the least popular one with only 5 bullish hedge fund positions. SMART Global Holdings, Inc. (NASDAQ:SGH) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and 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 13.4% in 2020 through June 22nd and surpassed the market by 15.9 percentage points. Unfortunately SGH wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); SGH investors were disappointed as the stock returned 7.3% during the second quarter 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 most of these stocks already outperformed the market in 2020.

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