We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do (like Peltz’s recent General Electric losses). However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards SVMK Inc. (NASDAQ:SVMK).
Is SVMK a good stock to buy? SVMK Inc. (NASDAQ:SVMK) shares haven’t seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 33 hedge funds’ portfolios at the end of the third quarter of 2020. Our calculations also showed that SVMK 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). 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 JetBlue Airways Corporation (NASDAQ:JBLU), Fox Factory Holding Corp (NASDAQ:FOXF), and Selective Insurance Group (NASDAQ:SIGI) to gather more data points.
Video: Watch our video about the top 5 most popular hedge fund stocks.
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 S&P 500 ETFs by more than 66 percentage points since March 2017 (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 stocks that are in our short portfolio.
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. Keeping this in mind we’re going to take a gander at the latest hedge fund action surrounding SVMK Inc. (NASDAQ:SVMK).
Do Hedge Funds Think SVMK Is A Good Stock To Buy Now?
At the end of the third quarter, a total of 33 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the previous quarter. By comparison, 26 hedge funds held shares or bullish call options in SVMK a year ago. With hedge funds’ capital changing hands, there exists an “upper tier” of notable hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).
Among these funds, Legion Partners Asset Management held the most valuable stake in SVMK Inc. (NASDAQ:SVMK), which was worth $34.1 million at the end of the third quarter. On the second spot was Park West Asset Management which amassed $32.4 million worth of shares. Royce & Associates, ThornTree Capital Partners, and D E Shaw were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Legion Partners Asset Management allocated the biggest weight to SVMK Inc. (NASDAQ:SVMK), around 8.17% of its 13F portfolio. Akaris Global Partners is also relatively very bullish on the stock, designating 7.42 percent of its 13F equity portfolio to SVMK.
Judging by the fact that SVMK Inc. (NASDAQ:SVMK) has faced a decline in interest from the smart money, it’s easy to see that there lies a certain “tier” of fund managers who were dropping their entire stakes by the end of the third quarter. Intriguingly, Zachary Miller’s Parian Global Management dumped the biggest investment of the “upper crust” of funds watched by Insider Monkey, comprising close to $10.3 million in stock. Warren Lammert’s fund, Granite Point Capital, also sold off its stock, about $5.2 million worth. These transactions are important to note, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s go over hedge fund activity in other stocks similar to SVMK Inc. (NASDAQ:SVMK). These stocks are JetBlue Airways Corporation (NASDAQ:JBLU), Fox Factory Holding Corp (NASDAQ:FOXF), Selective Insurance Group (NASDAQ:SIGI), 51job, Inc. (NASDAQ:JOBS), National Vision Holdings, Inc. (NASDAQ:EYE), Altair Engineering Inc. (NASDAQ:ALTR), and The Ensign Group, Inc. (NASDAQ:ENSG). All of these stocks’ market caps match SVMK’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 18.1 hedge funds with bullish positions and the average amount invested in these stocks was $156 million. That figure was $247 million in SVMK’s case. JetBlue Airways Corporation (NASDAQ:JBLU) is the most popular stock in this table. On the other hand 51job, Inc. (NASDAQ:JOBS) is the least popular one with only 10 bullish hedge fund positions. Compared to these stocks SVMK Inc. (NASDAQ:SVMK) is more popular among hedge funds. Our overall hedge fund sentiment score for SVMK is 85. 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. Unfortunately SVMK wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on SVMK were disappointed as the stock returned 7.2% since the end of the third quarter (through 12/18) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.