SLM Corp (SLM) Fell Out Of Favor With Hedge Funds?

Out of thousands of stocks that are currently traded on the market, it is difficult to identify those that will really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of nearly 900 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has the potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about SLM Corp (NASDAQ:SLM).

SLM Corp (NASDAQ:SLM) shares haven’t seen a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 27 hedge funds’ portfolios at the end of the third quarter of 2021. Our calculations also showed that SLM isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings). 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 Element Solutions Inc. (NYSE:ESI), Squarespace Inc. (NYSE:SQSP), and TFS Financial Corporation (NASDAQ:TFSL) to gather more data points.

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. With all of this in mind let’s take a glance at the recent hedge fund action encompassing SLM Corp (NASDAQ:SLM).


Julian Robertson of Tiger Management

Do Hedge Funds Think SLM Is A Good Stock To Buy Now?

At Q3’s end, a total of 27 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards SLM over the last 25 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, ValueAct Capital was the largest shareholder of SLM Corp (NASDAQ:SLM), with a stake worth $297.7 million reported as of the end of September. Trailing ValueAct Capital was Impactive Capital, which amassed a stake valued at $175.3 million. Arrowstreet Capital, GLG Partners, and Tiger Management 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 Impactive Capital allocated the biggest weight to SLM Corp (NASDAQ:SLM), around 13.75% of its 13F portfolio. Tiger Management is also relatively very bullish on the stock, designating 10.17 percent of its 13F equity portfolio to SLM.

Due to the fact that SLM Corp (NASDAQ:SLM) has witnessed a decline in interest from the smart money, logic holds that there was a specific group of funds that decided to sell off their positions entirely in the third quarter. At the top of the heap, Steven Tananbaum’s GoldenTree Asset Management sold off the largest stake of the “upper crust” of funds tracked by Insider Monkey, worth close to $20.3 million in stock, and Steve Cohen’s Point72 Asset Management was right behind this move, as the fund dumped about $1.8 million worth. These bearish behaviors are important to note, as aggregate 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 SLM Corp (NASDAQ:SLM). These stocks are Element Solutions Inc. (NYSE:ESI), Squarespace Inc. (NYSE:SQSP), TFS Financial Corporation (NASDAQ:TFSL), Evercore Inc. (NYSE:EVR), Glacier Bancorp, Inc. (NASDAQ:GBCI), Twist Bioscience Corporation (NASDAQ:TWST), and Newegg Commerce Inc. (NASDAQ:NEGG). This group of stocks’ market caps resemble SLM’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ESI 28 649935 5
SQSP 11 93960 -1
TFSL 9 133035 0
EVR 32 388540 1
GBCI 15 62962 4
TWST 19 780112 -4
NEGG 5 2118 4
Average 17 301523 1.3

View table here if you experience formatting issues.

As you can see these stocks had an average of 17 hedge funds with bullish positions and the average amount invested in these stocks was $302 million. That figure was $892 million in SLM’s case. Evercore Inc. (NYSE:EVR) is the most popular stock in this table. On the other hand Newegg Commerce Inc. (NASDAQ:NEGG) is the least popular one with only 5 bullish hedge fund positions. SLM Corp (NASDAQ:SLM) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for SLM is 66.5. 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 positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 31.1% in 2021 through December 9th and beat the market again by 5.1 percentage points. Unfortunately SLM wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on SLM were disappointed as the stock returned 7.4% since the end of September (through 12/9) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

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