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Is SanDisk Corporation (SNDK) Going to Burn These Hedge Funds?

The worries about the economic slowdown in China and the ongoing uncertainty about the path of interest-rate increases triggered several waves of equity sell-offs during the third quarter. Of course, most hedge funds and other asset managers had to stomach substantial losses during the bloody three-month period, which might have caused some to consider fleeing the U.S. equity markets. Interestingly, smaller-cap stocks registered higher losses than large-capitalization stocks during the September quarter, suggesting that institutional investors heavily discarded seemingly riskier equities amid high uncertainty and turmoil. In fact, the Russell 2000 Index lost 11.9% in the third quarter, while the Standard and Poor’s 500 benchmark declined a mere 6.4%. This article will lay out and discuss the hedge fund and institutional investor sentiment towards SanDisk Corporation (NASDAQ:SNDK).

SanDisk Corporation (NASDAQ:SNDK) investors should pay attention to a decrease in activity from the world’s largest hedge funds recently. 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 Coca-Cola Enterprises Inc (NYSE:CCE), Henry Schein, Inc. (NASDAQ:HSIC), and Hologic, Inc. (NASDAQ:HOLX) to gather more data points.

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In the financial world, there are numerous gauges investors employ to assess their holdings. Two of the less utilized gauges are hedge fund and insider trading interest. Our researchers have shown that, historically, those who follow the best picks of the top fund managers can outpace the broader indices by a healthy margin (see the details here).

With all of this in mind, let’s analyze the recent action surrounding SanDisk Corporation (NASDAQ:SNDK).

How have hedgies been trading SanDisk Corporation (NASDAQ:SNDK)?

At the end of September, a total of 38 of the hedge funds tracked by Insider Monkey were long this stock, a decline of 24% from one quarter earlier. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were increasing their holdings considerably (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Iridian Asset Management, managed by David Cohen and Harold Levy, holds the number one position in SanDisk Corporation (NASDAQ:SNDK). Iridian Asset Management has a $333.9 million position in the stock, comprising 2.8% of its 13F portfolio. Sitting at the No. 2 spot is Kensico Capital, led by Michael Lowenstein, holding a $232.9 million position; the fund has 4.9% of its 13F portfolio invested in the stock. Some other hedge funds and institutional investors with similar optimism comprise D E Shaw, Ken Griffin’s Citadel Investment Group and Curtis Macnguyen’s Ivory Capital (Investment Mgmt).

Since SanDisk Corporation (NASDAQ:SNDK) has experienced a bearish sentiment from the smart money, we can see that there lies a certain “tier” of money managers who sold off their entire stakes heading into Q4. Interestingly, Gordy Holterman and Derek Dunn’s Overland Advisors dropped the biggest stake of the 700 funds monitored by Insider Monkey, worth an estimated $76.3 million in stock. Michael Hintze’s fund, CQS Cayman LP, also said goodbye to its stock, about $50.8 million worth of shares. These transactions are intriguing to say the least, as aggregate hedge fund interest was cut by 12 funds heading into Q4.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as SanDisk Corporation (NASDAQ:SNDK) but similarly valued. We will take a look at Coca-Cola Enterprises Inc (NYSE:CCE), Henry Schein, Inc. (NASDAQ:HSIC), Hologic, Inc. (NASDAQ:HOLX), and Mosaic Co (NYSE:MOS). This group of stocks’ market values is closest to Black Diamond Inc (BDE)’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CCE 28 847569 -4
HSIC 22 388271 5
HOLX 38 2035238 7
MOS 39 505581 -8

As you can see, these stocks had an average of 32 hedge funds with bullish positions and the average amount invested in these stocks was $944 million. That figure was $1.02 billion in SanDisk Corporation (NASDAQ:SNDK)’s case. Mosaic Co (NYSE:MOS) is the most popular stock in this table. On the other hand, Henry Schein, Inc. (NASDAQ:HSIC) is the least popular one with only 22 bullish hedge fund positions. SanDisk Corporation (NASDAQ:SNDK) 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, Mosaic Co (NYSE:MOS) might be a better candidate to consider a long position.

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