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Here Is What Hedge Funds Think About SolarCity Corp (SCTY)

The government requires hedge funds and wealthy investors with over a certain portfolio size to file a report that shows their positions at the end of every quarter. Even though it isn’t the intention, these filings level the playing field for ordinary investors. The latest round of 13F filings discloses the funds’ positions on September 30. We at Insider Monkey have made an extensive database of more than 700 of those elite funds and prominent investors’ filings. In this article, we analyze how these elite funds and prominent investors traded SolarCity Corp (NASDAQ:SCTY) based on those filings.

SolarCity Corp (NASDAQ:SCTY) investors should be aware of a decrease in enthusiasm from smart money recently. SCTY was in 29 hedge funds’ portfolios at the end of the third quarter of 2015. There were 34 hedge funds in our database with SCTY positions at the end of the previous quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as GoPro Inc (NASDAQ:GPRO), Aecom (NYSE:ACM), and AptarGroup, Inc. (NYSE:ATR) to gather more data points.

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If you’d ask most market participants, hedge funds are perceived as slow, old investment vehicles of the past. While there are more than 8000 funds trading at present, Our researchers choose to focus on the leaders of this group, approximately 700 funds. Most estimates calculate that this group of people preside over most of the smart money’s total asset base, and by keeping track of their top equity investments, Insider Monkey has unsheathed a few investment strategies that have historically surpassed the market. Insider Monkey’s small-cap hedge fund strategy surpassed the S&P 500 index by 12 percentage points annually for a decade in their back tests.

With all of this in mind, we’re going to analyze the fresh action regarding SolarCity Corp (NASDAQ:SCTY).

How are hedge funds trading SolarCity Corp (NASDAQ:SCTY)?

At Q3’s end, a total of 29 of the hedge funds tracked by Insider Monkey were long this stock, a change of -15% from one quarter earlier. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were upping their holdings considerably (or already accumulated large positions).

According to Insider Monkey’s hedge fund database, SRS Investment Management, managed by Karthik Sarma, holds the most valuable position in SolarCity Corp (NASDAQ:SCTY). SRS Investment Management has a $342.4 million position in the stock, comprising 11.4% of its 13F portfolio. Sitting at the No. 2 spot is Canyon Capital Advisors, managed by Joshua Friedman and Mitchell Julis, which holds a $190.1 million position; the fund has 5.2% of its 13F portfolio invested in the stock. Remaining hedge funds and institutional investors that hold long positions comprise John Burbank’s Passport Capital, and Kenneth Tropin’s Graham Capital Management.

Since SolarCity Corp (NASDAQ:SCTY) has witnessed a declination in interest from the aggregate hedge fund industry, it’s easy to see that there were a few funds that decided to sell off their positions entirely heading into Q4. It’s worth mentioning that Jeffrey Tannenbaum’s Fir Tree dropped the biggest stake of all the hedgies followed by Insider Monkey, comprising about $99.5 million in stock, and Robert Pitts’ Steadfast Capital Management was right behind this move, as the fund dropped about $61.6 million worth. These transactions are important to note, as aggregate hedge fund interest dropped by 5 funds heading into Q4.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as SolarCity Corp (NASDAQ:SCTY) but similarly valued. We will take a look at GoPro Inc (NASDAQ:GPRO), Aecom (NYSE:ACM), AptarGroup, Inc. (NYSE:ATR), and Alere Inc (NYSE:ALR). This group of stocks’ market values are closest to SCTY’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
GPRO 25 240454 4
ACM 22 448379 -5
ATR 18 101128 3
ALR 39 1344275 3

As you can see these stocks had an average of 26 hedge funds with bullish positions and the average amount invested in these stocks was $534 million. That figure was $872 million in SCTY’s case. Alere Inc (NYSE:ALR) is the most popular stock in this table. On the other hand AptarGroup, Inc. (NYSE:ATR) is the least popular one with only 18 bullish hedge fund positions. SolarCity Corp (NASDAQ:SCTY) 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. In this regard ALR might be a better candidate to consider a long position.

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