Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that’s why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to smartest analysts and expensive data/information sources that individual investors can’t match. So should one consider investing in Sirius XM Holdings Inc (NASDAQ:SIRI)? The smart money sentiment can provide an answer to this question.
Is SIRI a good stock to buy? Sirius XM Holdings Inc (NASDAQ:SIRI) was in 37 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistic is 42. SIRI shareholders have witnessed a decrease in hedge fund sentiment lately. There were 42 hedge funds in our database with SIRI positions at the end of the second quarter. Our calculations also showed that SIRI isn’t among the 30 most popular stocks among hedge funds (click for Q3 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.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 113% since March 2017 and outperformed the S&P 500 ETFs by more than 66 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this under the radar cannabis stock right now. We go through lists like the 15 best blue chip stocks to buy to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. With all of this in mind let’s take a gander at the recent hedge fund action regarding Sirius XM Holdings Inc (NASDAQ:SIRI).
Do Hedge Funds Think SIRI Is A Good Stock To Buy Now?
Heading into the fourth quarter of 2020, a total of 37 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -12% from the second quarter of 2020. The graph below displays the number of hedge funds with bullish position in SIRI over the last 21 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
When looking at the institutional investors followed by Insider Monkey, Warren Buffett’s Berkshire Hathaway has the biggest position in Sirius XM Holdings Inc (NASDAQ:SIRI), worth close to $268 million, amounting to 0.1% of its total 13F portfolio. The second most bullish fund manager is Zimmer Partners, managed by Stuart J. Zimmer, which holds a $110 million position; 1.7% of its 13F portfolio is allocated to the stock. Remaining professional money managers that hold long positions comprise Renaissance Technologies, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital and Ken Griffin’s Citadel Investment Group. In terms of the portfolio weights assigned to each position Hidden Lake Asset Management allocated the biggest weight to Sirius XM Holdings Inc (NASDAQ:SIRI), around 8.31% of its 13F portfolio. Zimmer Partners is also relatively very bullish on the stock, earmarking 1.7 percent of its 13F equity portfolio to SIRI.
Since Sirius XM Holdings Inc (NASDAQ:SIRI) has faced bearish sentiment from hedge fund managers, it’s safe to say that there were a few fund managers that elected to cut their entire stakes last quarter. At the top of the heap, Phill Gross and Robert Atchinson’s Adage Capital Management dropped the largest investment of all the hedgies monitored by Insider Monkey, totaling about $39.8 million in stock. Dmitry Balyasny’s fund, Balyasny Asset Management, also said goodbye to its stock, about $8.9 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest dropped by 5 funds last quarter.
Let’s now take a look at hedge fund activity in other stocks similar to Sirius XM Holdings Inc (NASDAQ:SIRI). These stocks are Church & Dwight Co., Inc. (NYSE:CHD), Mettler-Toledo International Inc. (NYSE:MTD), Zillow Group Inc (NASDAQ:Z), Lloyds Banking Group PLC (NYSE:LYG), XP Inc. (NASDAQ:XP), Welltower Inc. (NYSE:WELL), and Yandex NV (NASDAQ:YNDX). This group of stocks’ market valuations are closest to SIRI’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 31.1 hedge funds with bullish positions and the average amount invested in these stocks was $1073 million. That figure was $748 million in SIRI’s case. Zillow Group Inc (NASDAQ:Z) is the most popular stock in this table. On the other hand Lloyds Banking Group PLC (NYSE:LYG) is the least popular one with only 5 bullish hedge fund positions. Sirius XM Holdings Inc (NASDAQ:SIRI) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for SIRI is 51.4. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 33.3% in 2020 through December 18th and still beat the market by 16.4 percentage points. Hedge funds were also right about betting on SIRI as the stock returned 18% since the end of Q3 (through 12/18) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.