The latest 13F reporting period has come and gone, and Insider Monkey have plowed through 823 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of June 30th, when the S&P 500 Index was trading around the 3100 level. Since the end of March, investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned more than 50% since its bottom. In this article you are going to find out whether hedge funds thought SLM Corp (NASDAQ:SLM) was a good investment heading into the third quarter and how the stock traded in comparison to the top hedge fund picks.
SLM Corp (NASDAQ:SLM) investors should be aware of an increase in enthusiasm from smart money lately. SLM Corp (NASDAQ:SLM) was in 32 hedge funds’ portfolios at the end of the second quarter of 2020. The all time high for this statistics is 39. There were 27 hedge funds in our database with SLM positions at the end of the first quarter. Our calculations also showed that SLM isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks).
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 56 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, this “mom” trader turned $2000 into $2 million within 2 years. So, we are checking out her best trade idea of the month. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We go through lists like the 10 most profitable companies in the world 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. With all of this in mind we’re going to review the fresh hedge fund action regarding SLM Corp (NASDAQ:SLM).
Hedge fund activity in SLM Corp (NASDAQ:SLM)
Heading into the third quarter of 2020, a total of 32 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 19% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards SLM over the last 20 quarters. With the smart money’s capital changing hands, there exists a select group of notable hedge fund managers who were increasing their holdings meaningfully (or already accumulated large positions).
Among these funds, ValueAct Capital held the most valuable stake in SLM Corp (NASDAQ:SLM), which was worth $227 million at the end of the third quarter. On the second spot was Fir Tree which amassed $87.1 million worth of shares. Impactive Capital, Arrowstreet Capital, and GoldenTree Asset 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 10.56% of its 13F portfolio. Fir Tree is also relatively very bullish on the stock, dishing out 6.55 percent of its 13F equity portfolio to SLM.
With a general bullishness amongst the heavyweights, specific money managers were leading the bulls’ herd. GoldenTree Asset Management, managed by Steven Tananbaum, created the most outsized position in SLM Corp (NASDAQ:SLM). GoldenTree Asset Management had $21.6 million invested in the company at the end of the quarter. Israel Englander’s Millennium Management also initiated a $3.7 million position during the quarter. The other funds with new positions in the stock are Paul Tudor Jones’s Tudor Investment Corp, Donald Sussman’s Paloma Partners, and Benjamin A. Smith’s Laurion Capital Management.
Let’s now take a look at hedge fund activity in other stocks similar to SLM Corp (NASDAQ:SLM). These stocks are United States Cellular Corporation (NYSE:USM), SSR Mining Inc. (NASDAQ:SSRM), Cracker Barrel Old Country Store, Inc. (NASDAQ:CBRL), SPS Commerce, Inc. (NASDAQ:SPSC), Mimecast Limited (NASDAQ:MIME), Brighthouse Financial, Inc. (NASDAQ:BHF), and Diodes Incorporated (NASDAQ:DIOD). This group of stocks’ market valuations are closest to SLM’s market valuation.
|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 22.4 hedge funds with bullish positions and the average amount invested in these stocks was $203 million. That figure was $463 million in SLM’s case. Mimecast Limited (NASDAQ:MIME) is the most popular stock in this table. On the other hand Diodes Incorporated (NASDAQ:DIOD) is the least popular one with only 14 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 79.6. 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 23.8% in 2020 through September 14th and still beat the market by 17.6 percentage points. Hedge funds were also right about betting on SLM as the stock returned 11.4% during Q3 (through September 14th) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.