Is SLM Corp (SLM) Going to Burn These Hedge Funds?

Is SLM Corp (NASDAQ:SLM) a good place to invest some of your money right now? We can gain invaluable insight to help us answer that question by studying the investment trends of top investors, who employ world-class Ivy League graduates, who are given immense resources and industry contacts to put their financial expertise to work. The top picks of these firms have historically outperformed the market when we account for known risk factors, making them very valuable investment ideas.

Is SLM Corp (NASDAQ:SLM) an outstanding investment right now? Investors who are in the know were getting more optimistic. The number of long hedge fund bets rose by 8 lately. SLM Corp (NASDAQ:SLM) was in 27 hedge funds’ portfolios at the end of March. The all time high for this statistic is 39. Our calculations also showed that SLM isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).

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 206.8% since March 2017 and outperformed the S&P 500 ETFs by more than 115 percentage points (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Sander Gerber of Hudson Bay Capital

Sander Gerber of Hudson Bay Capital

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, economists warn of inflation flare up. So, we are checking out this backdoor gold play that has hit peak gains of 718% in a little over a year. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. With all of this in mind let’s take a glance at the key hedge fund action surrounding SLM Corp (NASDAQ:SLM).

Do Hedge Funds Think SLM Is A Good Stock To Buy Now?

At the end of March, a total of 27 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 42% from the previous quarter. The graph below displays the number of hedge funds with bullish position in SLM over the last 23 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is SLM A Good Stock To Buy?

The largest stake in SLM Corp (NASDAQ:SLM) was held by ValueAct Capital, which reported holding $472.5 million worth of stock at the end of December. It was followed by Impactive Capital with a $129.7 million position. Other investors bullish on the company included Arrowstreet Capital, Laurion Capital Management, and GoldenTree Asset Management. In terms of the portfolio weights assigned to each position Impactive Capital allocated the biggest weight to SLM Corp (NASDAQ:SLM), around 16.05% of its 13F portfolio. Tiger Management is also relatively very bullish on the stock, earmarking 9.18 percent of its 13F equity portfolio to SLM.

Now, specific money managers were leading the bulls’ herd. Laurion Capital Management, managed by Benjamin A. Smith, initiated the largest position in SLM Corp (NASDAQ:SLM). Laurion Capital Management had $60.2 million invested in the company at the end of the quarter. Sander Gerber’s Hudson Bay Capital Management also made a $24.4 million investment in the stock during the quarter. The following funds were also among the new SLM investors: John Overdeck and David Siegel’s Two Sigma Advisors, Emanuel J. Friedman’s EJF Capital, and Donald Sussman’s Paloma Partners.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as SLM Corp (NASDAQ:SLM) but similarly valued. These stocks are Envista Holdings Corporation (NYSE:NVST), Woori Financial Group Inc. (NYSE:WF), MicroStrategy Incorporated (NASDAQ:MSTR), The AZEK Company Inc. (NYSE:AZEK), Wyndham Hotels & Resorts, Inc. (NYSE:WH), ANGI Homeservices Inc (NASDAQ:ANGI), and Littelfuse, Inc. (NASDAQ:LFUS). This group of stocks’ market valuations are closest to SLM’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
NVST 34 889306 1
WF 2 3273 1
MSTR 20 132184 5
AZEK 29 252039 6
WH 24 838355 -2
ANGI 35 309329 4
LFUS 21 451577 0
Average 23.6 410866 2.1

View table here if you experience formatting issues.

As you can see these stocks had an average of 23.6 hedge funds with bullish positions and the average amount invested in these stocks was $411 million. That figure was $996 million in SLM’s case. ANGI Homeservices Inc (NASDAQ:ANGI) is the most popular stock in this table. On the other hand Woori Financial Group Inc. (NYSE:WF) is the least popular one with only 2 bullish hedge fund positions. SLM Corp (NASDAQ:SLM) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for SLM is 68.6. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 24% in 2021 through July 9th and still beat the market by 6.7 percentage points. Hedge funds were also right about betting on SLM, though not to the same extent, as the stock returned 11.6% since Q1 (through July 9th) and outperformed the market as well.

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