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Is S&W Seed Company (SANW) Going to Burn These Hedge Funds?

Is S&W Seed Company (NASDAQ:SANW) a good stock to buy right now? We at Insider Monkey like to examine what billionaires and hedge funds think of a company before doing days of research on it. Given their 2 and 20 payment structure, hedge funds have more resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also have numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.

Is S&W Seed Company (NASDAQ:SANW) a sound investment today? Money managers are getting less bullish. The number of long hedge fund bets dropped by 1 in recent months. S&W Seed Company (NASDAQ:SANW) was in 5 hedge funds’ portfolios at the end of September. There were 6 hedge funds in our database with S&W Seed Company (NASDAQ:SANW) positions at the end of the previous quarter. The stock trading sentiment was quite similar to the hedge fund sentiment, as the shares of S&W Seed Company (NASDAQ:SANW) were down 5.74% during the quarter. We will find out more about the hedge funds that held positions in the company, at the end of September.

For an in-depth understanding of the hedge fund sentiment surrounding stocks with similar market caps, we will also compare S&W Seed Company (NASDAQ:SANW) to other stocks, including Ocera Therapeutics Inc (NASDAQ:OCRX), AXT Inc (NASDAQ:AXTI), and BlueLinx Holdings Inc. (NYSE:BXC) to get a better sense of its popularity.

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In the eyes of most stock holders, hedge funds are assumed to be underperforming, old financial vehicles of yesteryear. While there are greater than 8000 funds in operation at present, our experts look at the crème de la crème of this club, around 700 funds. These hedge fund managers direct the lion’s share of the hedge fund industry’s total asset base, and by keeping track of their finest investments, Insider Monkey has unsheathed several investment strategies that have historically beaten the market. Insider Monkey’s small-cap hedge fund strategy defeated the S&P 500 index by 12 percentage points per year for a decade in their back tests.

Keeping this in mind, we’re going to take a look at the key action encompassing S&W Seed Company (NASDAQ:SANW).

What have hedge funds been doing with S&W Seed Company (NASDAQ:SANW)?

At the end of the third quarter, a total of 5 of the hedge funds tracked by Insider Monkey were long this stock, a decline of 17% from the second quarter. With hedge funds’ positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were upping their stakes meaningfully (or already accumulated large positions).

According to Insider Monkey’s hedge fund database, MFP Investors, managed by Michael Price, holds the most valuable position in S&W Seed Company (NASDAQ:SANW). MFP Investors has a $6 million position in the stock, comprising 0.9% of its 13F portfolio. Sitting at the No. 2 spot is Coe Capital Management, managed by Mark Coe, which holds a $0.8 million position; the fund has 0.3% of its 13F portfolio invested in the stock. Other peers with similar optimism encompass Ken Grossman and Glen Schneider’s SG Capital Management, and Renaissance Technologies.

Seeing as S&W Seed Company (NASDAQ:SANW) has witnessed a bearish sentiment from the entirety of the hedge funds we track, it’s easy to see that there lies a certain “tier” of hedgies that slashed their full holdings heading into Q4. Intriguingly, Ken Griffin’s Citadel Investment Group cut the biggest stake of all the hedgies tracked by Insider Monkey, valued at about $0.1 million in stock. These moves are important to note, as aggregate hedge fund interest was cut by 1 fund heading into Q4.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as S&W Seed Company (NASDAQ:SANW) but similarly valued. We will take a look at Ocera Therapeutics Inc (NASDAQ:OCRX), AXT Inc (NASDAQ:AXTI), BlueLinx Holdings Inc. (NYSE:BXC), and RCS Capital Corp (NYSE:RCAP). This group of stocks’ market caps resemble S&W Seed Company (NASDAQ:SANW)’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
OCRX 9 15385 -1
AXTI 4 9351 0
BXC 7 45941 -3
RCAP 15 16564 -4

As you can see, these stocks had an average of 9 hedge funds with bullish positions and the average amount invested in these stocks was $22 million. That figure was $8 million in S&W Seed Company (NASDAQ:SANW)’s case. RCS Capital Corp (NYSE:RCAP) is the most popular stock in this table. On the other hand, AXT Inc (NASDAQ:AXTI) is the least popular one with only 4 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. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard, RCS Capital Corp (NYSE:RCAP) might be a better candidate to consider a long position.

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