As we already know from media reports and hedge fund investor letters, many hedge funds lost money in fourth quarter, blaming macroeconomic conditions and unpredictable events that hit several sectors, with technology among them. Nevertheless, most investors decided to stick to their bullish theses and their long-term focus allows us to profit from the recent declines. In particular, let’s take a look at what hedge funds think about Science Applications International Corp (NYSE:SAIC) in this article.
Science Applications International Corp (NYSE:SAIC) shares haven’t seen a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 24 hedge funds’ portfolios at the end of December. 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 Old National Bancorp (NYSE:ONB), Corelogic Inc (NYSE:CLGX), and Akcea Therapeutics, Inc. (NASDAQ:AKCA) to gather more data points.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.
We’re going to go over the key hedge fund action encompassing Science Applications International Corp (NYSE:SAIC).
How have hedgies been trading Science Applications International Corp (NYSE:SAIC)?
Heading into the first quarter of 2019, a total of 24 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from one quarter earlier. On the other hand, there were a total of 17 hedge funds with a bullish position in SAIC a year ago. With hedge funds’ capital changing hands, there exists a select group of key hedge fund managers who were upping their stakes significantly (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Cliff Asness’s AQR Capital Management has the largest position in Science Applications International Corp (NYSE:SAIC), worth close to $38.8 million, amounting to less than 0.1%% of its total 13F portfolio. The second largest stake is held by Matt Simon (Citadel) of Ashler Capital, with a $38.5 million position; the fund has 2.9% of its 13F portfolio invested in the stock. Other hedge funds and institutional investors that are bullish include Richard Barrera’s Roystone Capital Partners, Phill Gross and Robert Atchinson’s Adage Capital Management and Murray Stahl’s Horizon Asset Management.
Since Science Applications International Corp (NYSE:SAIC) has experienced bearish sentiment from the smart money, logic holds that there is a sect of hedge funds who sold off their positions entirely last quarter. Interestingly, Steve Pigott’s Fort Baker Capital Management dropped the largest position of the 700 funds tracked by Insider Monkey, valued at an estimated $5.7 million in stock. Matthew Hulsizer’s fund, PEAK6 Capital Management, also said goodbye to its stock, about $2.8 million worth. These moves are interesting, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s now take a look at hedge fund activity in other stocks similar to Science Applications International Corp (NYSE:SAIC). These stocks are Old National Bancorp (NASDAQ:ONB), Corelogic Inc (NYSE:CLGX), Akcea Therapeutics, Inc. (NASDAQ:AKCA), and John Wiley & Sons Inc (NYSE:JW). This group of stocks’ market valuations match SAIC’s market valuation.
|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 12.25 hedge funds with bullish positions and the average amount invested in these stocks was $107 million. That figure was $192 million in SAIC’s case. Corelogic Inc (NYSE:CLGX) is the most popular stock in this table. On the other hand Akcea Therapeutics, Inc. (NASDAQ:AKCA) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks Science Applications International Corp (NYSE:SAIC) is more popular among hedge funds. 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. Hedge funds were also right about betting on SAIC, though not to the same extent, as the stock returned 16.7% and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.