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Should You Buy Solar Senior Capital Ltd (SUNS)?

We are still in an overall bull market and many stocks that smart money investors were piling into surged through November 22nd. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 52% and 49% respectively. Hedge funds’ top 3 stock picks returned 39.1% this year and beat the S&P 500 ETFs by nearly 13 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like Solar Senior Capital Ltd (NASDAQ:SUNS).

Solar Senior Capital Ltd (NASDAQ:SUNS) shareholders have witnessed an increase in support from the world’s most elite money managers recently. SUNS was in 3 hedge funds’ portfolios at the end of the third quarter of 2019. There were 1 hedge funds in our database with SUNS holdings at the end of the previous quarter. Our calculations also showed that SUNS isn’t among the 30 most popular stocks among hedge funds.

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 flagship best performing hedge funds strategy returned 91% since May 2014 and outperformed the Russell 2000 ETFs by nearly 40 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Paul Marshall Marshall Wace

Paul Marshall of Marshall Wace

Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world’s most bearish hedge fund that’s more convinced than ever that a crash is coming, our long-short investment strategy doesn’t rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds‘ buy/sell signals. We’re going to analyze the recent hedge fund action surrounding Solar Senior Capital Ltd (NASDAQ:SUNS).

What does smart money think about Solar Senior Capital Ltd (NASDAQ:SUNS)?

At the end of the third quarter, a total of 3 of the hedge funds tracked by Insider Monkey were long this stock, a change of 200% from the second quarter of 2019. By comparison, 2 hedge funds held shares or bullish call options in SUNS a year ago. With hedge funds’ sentiment swirling, there exists a few noteworthy hedge fund managers who were increasing their holdings considerably (or already accumulated large positions).

SUNS_nov2019

When looking at the institutional investors followed by Insider Monkey, Two Sigma Advisors, managed by John Overdeck and David Siegel, holds the number one position in Solar Senior Capital Ltd (NASDAQ:SUNS). Two Sigma Advisors has a $0.8 million position in the stock, comprising less than 0.1%% of its 13F portfolio. Coming in second is Israel Englander of Millennium Management, with a $0.2 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. In terms of the portfolio weights assigned to each position Two Sigma Advisors allocated the biggest weight to Solar Senior Capital Ltd (NASDAQ:SUNS), around 0.0019% of its portfolio. Millennium Management is also relatively very bullish on the stock, earmarking 0.0004 percent of its 13F equity portfolio to SUNS.

As one would reasonably expect, key hedge funds were breaking ground themselves. Millennium Management, managed by Israel Englander, established the biggest position in Solar Senior Capital Ltd (NASDAQ:SUNS). Millennium Management had $0.2 million invested in the company at the end of the quarter. Paul Marshall and Ian Wace’s Marshall Wace also initiated a $0 million position during the quarter.

Let’s now take a look at hedge fund activity in other stocks similar to Solar Senior Capital Ltd (NASDAQ:SUNS). These stocks are Parker Drilling Company (NYSE:PKD), 22nd Century Group, Inc (NYSE:XXII), Pivotal Investment Corporation II (NYSE:PIC), and Lumber Liquidators Holdings Inc (NYSE:LL). This group of stocks’ market values match SUNS’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
PKD 4 91367 0
XXII 2 227 -1
PIC 15 50569 15
LL 10 20454 -3
Average 7.75 40654 2.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 7.75 hedge funds with bullish positions and the average amount invested in these stocks was $41 million. That figure was $1 million in SUNS’s case. Pivotal Investment Corporation II (NYSE:PIC) is the most popular stock in this table. On the other hand 22nd Century Group, Inc (NYSE:XXII) is the least popular one with only 2 bullish hedge fund positions. Solar Senior Capital Ltd (NASDAQ:SUNS) 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. Our calculations showed that top 20 most popular stocks among hedge funds returned 34.7% in 2019 through November 22nd and outperformed the S&P 500 ETF (SPY) by 8.5 percentage points. Unfortunately SUNS wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); SUNS investors were disappointed as the stock returned 0.9% during the fourth quarter (through 11/22) 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 70 percent of these stocks already outperformed the market in Q4.

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

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