Based on the fact that hedge funds have collectively under-performed the market for several years, it would be easy to assume that their stock picks simply aren’t very good. However, our research shows this not to be the case. In fact, when it comes to their very top picks collectively, they show a strong ability to pick winning stocks. This year hedge funds’ top 30 stock picks easily bested the broader market, at 6.7% compared to 2.6%, despite there being a few duds in there like Facebook (even their collective wisdom isn’t perfect). The results show that there is plenty of merit to imitating the collective wisdom of top investors.
Solaredge Technologies Inc (NASDAQ:SEDG) has seen a decrease in support from the world’s most elite money managers in recent months. SEDG was in 14 hedge funds’ portfolios at the end of September. There were 15 hedge funds in our database with SEDG positions at the end of the previous quarter. Our calculations also showed that SEDG isn’t among the 30 most popular stocks among hedge funds.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 18 percentage points since May 2014 through December 3, 2018 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 24% through December 3, 2018. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
We’re going to take a gander at the key hedge fund action encompassing Solaredge Technologies Inc (NASDAQ:SEDG).
What have hedge funds been doing with Solaredge Technologies Inc (NASDAQ:SEDG)?
Heading into the fourth quarter of 2018, a total of 14 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -7% from one quarter earlier. By comparison, 20 hedge funds held shares or bullish call options in SEDG heading into this year. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Solaredge Technologies Inc (NASDAQ:SEDG) was held by Renaissance Technologies, which reported holding $16.4 million worth of stock at the end of September. It was followed by Rima Senvest Management with a $12.1 million position. Other investors bullish on the company included Millennium Management, Two Sigma Advisors, and Balyasny Asset Management.
Since Solaredge Technologies Inc (NASDAQ:SEDG) has witnessed bearish sentiment from hedge fund managers, we can see that there lies a certain “tier” of fund managers that elected to cut their positions entirely last quarter. At the top of the heap, Peter Muller’s PDT Partners said goodbye to the biggest stake of the “upper crust” of funds followed by Insider Monkey, comprising about $11.6 million in stock. Paul Tudor Jones’s fund, Tudor Investment Corp, also said goodbye to its stock, about $1.6 million worth. These moves are interesting, as total hedge fund interest fell by 1 funds last quarter.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Solaredge Technologies Inc (NASDAQ:SEDG) but similarly valued. These stocks are Workiva Inc (NYSE:WK), Actuant Corporation (NYSE:ATU), Calavo Growers, Inc. (NASDAQ:CVGW), and MRC Global Inc (NYSE:MRC). This group of stocks’ market caps match SEDG’s market cap.
|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 15 hedge funds with bullish positions and the average amount invested in these stocks was $186 million. That figure was $67 million in SEDG’s case. MRC Global Inc (NYSE:MRC) is the most popular stock in this table. On the other hand Calavo Growers, Inc. (NASDAQ:CVGW) is the least popular one with only 12 bullish hedge fund positions. Solaredge Technologies Inc (NASDAQ:SEDG) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard MRC might be a better candidate to consider a long position.
Disclosure: None. This article was originally published at Insider Monkey.