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Sogou Inc. (SOGO): These Hedge Funds Cashed Out Too Early

We are still in an overall bull market and many stocks that smart money investors were piling into surged through October 17th. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 45% and 39% respectively. Hedge funds’ top 3 stock picks returned 34.4% this year and beat the S&P 500 ETFs by 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 Sogou Inc. (NYSE:SOGO).

Sogou Inc. (NYSE:SOGO) has experienced a decrease in enthusiasm from smart money lately. SOGO was in 5 hedge funds’ portfolios at the end of the second quarter of 2019. There were 8 hedge funds in our database with SOGO positions at the end of the previous quarter. Our calculations also showed that SOGO isn’t among the 30 most popular stocks among hedge funds (see the video below).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

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 25.8% year to date (through May 30th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 40 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Chase Coleman Tiger Global

Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We’re going to take a look at the recent hedge fund action surrounding Sogou Inc. (NYSE:SOGO).

What have hedge funds been doing with Sogou Inc. (NYSE:SOGO)?

At Q2’s end, a total of 5 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -38% from one quarter earlier. On the other hand, there were a total of 9 hedge funds with a bullish position in SOGO a year ago. With hedge funds’ capital changing hands, there exists a select group of noteworthy hedge fund managers who were increasing their holdings significantly (or already accumulated large positions).

No of Hedge Funds with SOGO Positions

The largest stake in Sogou Inc. (NYSE:SOGO) was held by Tiger Global Management LLC, which reported holding $0.6 million worth of stock at the end of March. It was followed by Citadel Investment Group with a $0.3 million position. Other investors bullish on the company included Two Sigma Advisors, Citadel Investment Group, and Segantii Capital.

Due to the fact that Sogou Inc. (NYSE:SOGO) has witnessed bearish sentiment from the entirety of the hedge funds we track, it’s easy to see that there is a sect of fund managers who sold off their entire stakes last quarter. Interestingly, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital dropped the biggest stake of all the hedgies tracked by Insider Monkey, worth an estimated $3.9 million in stock, and David Costen Haley’s HBK Investments was right behind this move, as the fund cut about $0.6 million worth. These moves are important to note, as total hedge fund interest fell by 3 funds last quarter.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Sogou Inc. (NYSE:SOGO) but similarly valued. We will take a look at Delphi Technologies PLC (NYSE:DLPH), BioTelemetry, Inc. (NASDAQ:BEAT), Redfin Corporation (NASDAQ:RDFN), and Osisko Gold Royalties Ltd (NYSE:OR). This group of stocks’ market values are closest to SOGO’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
DLPH 25 318872 1
BEAT 16 38086 -5
RDFN 10 179010 2
OR 12 41963 5
Average 15.75 144483 0.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 15.75 hedge funds with bullish positions and the average amount invested in these stocks was $144 million. That figure was $1 million in SOGO’s case. Delphi Technologies PLC (NYSE:DLPH) is the most popular stock in this table. On the other hand Redfin Corporation (NASDAQ:RDFN) is the least popular one with only 10 bullish hedge fund positions. Compared to these stocks Sogou Inc. (NYSE:SOGO) is even less popular than RDFN. Hedge funds clearly dropped the ball on SOGO as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. A small number of hedge funds were also right about betting on SOGO as the stock returned 20.5% during the third quarter and outperformed the market by an even larger margin.

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

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