Is S&W Seed Company (SANW) A Good Stock To Buy Now?

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the third quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 5 years and analyze what the smart money thinks of S&W Seed Company (NASDAQ:SANW) based on that data.

Is S&W Seed Company (SANW) a good stock to buy now? SANW shares haven’t seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 6 hedge funds’ portfolios at the end of the third quarter of 2020. Our calculations also showed that SANW 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). At the end of this article we will also compare SANW to other stocks including USA Truck, Inc. (NASDAQ:USAK), Pixelworks, Inc. (NASDAQ:PXLW), and Manitex International, Inc. (NASDAQ:MNTX) to get a better sense of its popularity.

Video: Watch our video about the top 5 most popular hedge fund stocks.

Today there are tons of indicators stock traders put to use to assess their holdings. Two of the most underrated indicators are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best hedge fund managers can beat their index-focused peers by a very impressive amount (see the details here).

Nelson Obus of Wynnefield Capital

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks 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 view the key hedge fund action surrounding S&W Seed Company (NASDAQ:SANW).

How are hedge funds trading S&W Seed Company (NASDAQ:SANW)?

At Q3’s end, a total of 6 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in SANW over the last 21 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is SANW A Good Stock To Buy?

The largest stake in S&W Seed Company (NASDAQ:SANW) was held by MFP Investors, which reported holding $39.6 million worth of stock at the end of September. It was followed by Wynnefield Capital with a $11.1 million position. Other investors bullish on the company included Fairpointe Capital, Millennium Management, and Birch Run Capital. In terms of the portfolio weights assigned to each position MFP Investors allocated the biggest weight to S&W Seed Company (NASDAQ:SANW), around 7.19% of its 13F portfolio. Wynnefield Capital is also relatively very bullish on the stock, designating 6.94 percent of its 13F equity portfolio to SANW.

We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Alta Fundamental Advisers. One hedge fund selling its entire position doesn’t always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don’t think this is the case in this case because only one of the 800+ hedge funds tracked by Insider Monkey identified as a viable investment and initiated a position in the stock (that fund was Millennium Management).

Let’s also examine hedge fund activity in other stocks similar to S&W Seed Company (NASDAQ:SANW). These stocks are USA Truck, Inc. (NASDAQ:USAK), Pixelworks, Inc. (NASDAQ:PXLW), Manitex International, Inc. (NASDAQ:MNTX), American Virtual Cloud Technologies, Inc. (NASDAQ:AVCT), Mallinckrodt Public Limited Company (NYSE:MNK), First United Corp (NASDAQ:FUNC), and Boxlight Corporation (NASDAQ:BOXL). This group of stocks’ market valuations match SANW’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
USAK 8 2324 5
PXLW 9 4915 0
MNTX 6 8481 0
AVCT 2 1071 0
MNK 12 3417 -2
FUNC 4 3568 0
BOXL 1 1285 0
Average 6 3580 0.4

View table here if you experience formatting issues.

As you can see these stocks had an average of 6 hedge funds with bullish positions and the average amount invested in these stocks was $4 million. That figure was $53 million in SANW’s case. Mallinckrodt Public Limited Company (NYSE:MNK) is the most popular stock in this table. On the other hand Boxlight Corporation (NASDAQ:BOXL) is the least popular one with only 1 bullish hedge fund positions. S&W Seed Company (NASDAQ:SANW) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for SANW is 50.2. 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. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. 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 30.7% in 2020 through November 27th and surpassed the market again by 16.1 percentage points. Unfortunately SANW wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); SANW investors were disappointed as the stock returned 8.1% since the end of September (through 11/27) 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.