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Solar Senior Capital Ltd (SUNS): Are Hedge Funds Right About This Stock?

In this article you are going to find out whether hedge funds think Solar Senior Capital Ltd (NASDAQ:SUNS) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It’s not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.

Solar Senior Capital Ltd (NASDAQ:SUNS) shareholders have witnessed an increase in hedge fund interest in recent months. Our calculations also showed that SUNS isn’t among the 30 most popular stocks among hedge funds (click for Q1 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.

To the average investor there are several indicators shareholders can use to assess stocks. Two of the most under-the-radar indicators are hedge fund and insider trading activity. Our researchers have shown that, historically, those who follow the best picks of the elite money managers can outpace their index-focused peers by a significant margin (see the details here).

John Overdeck of Two Sigma

John Overdeck of Two Sigma Advisors

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, legendary investor Bill Miller told investors to sell 7 extremely popular recession stocks last month. So, we went through his list and recommended another stock with 100% upside potential instead. We interview hedge fund managers and ask them about their best ideas. You can watch our latest hedge fund manager interview here and find out the name of the large-cap healthcare stock that Sio Capital’s Michael Castor expects to double. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind let’s analyze the recent hedge fund action surrounding Solar Senior Capital Ltd (NASDAQ:SUNS).

What have hedge funds been doing with Solar Senior Capital Ltd (NASDAQ:SUNS)?

At Q1’s end, a total of 3 of the hedge funds tracked by Insider Monkey were long this stock, a change of 200% from the fourth quarter of 2019. On the other hand, there were a total of 2 hedge funds with a bullish position in SUNS a year ago. With hedgies’ positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were increasing their holdings considerably (or already accumulated large positions).

Is SUNS A Good Stock To Buy?

The largest stake in Solar Senior Capital Ltd (NASDAQ:SUNS) was held by Two Sigma Advisors, which reported holding $0.6 million worth of stock at the end of September. It was followed by Citadel Investment Group with a $0.2 million position. The only other hedge fund that is bullish on the company was Millennium Management.

As aggregate interest increased, key hedge funds were leading the bulls’ herd. Citadel Investment Group, managed by Ken Griffin, initiated the most valuable position in Solar Senior Capital Ltd (NASDAQ:SUNS). Citadel Investment Group had $0.2 million invested in the company at the end of the quarter. Israel Englander’s Millennium Management also initiated a $0.1 million position during the quarter.

Let’s also examine hedge fund activity in other stocks similar to Solar Senior Capital Ltd (NASDAQ:SUNS). These stocks are iCAD Inc (NASDAQ:ICAD), Chico’s FAS, Inc. (NYSE:CHS), Applied Optoelectronics Inc (NASDAQ:AAOI), and Sussex Bancorp (NASDAQ:SBBX). This group of stocks’ market values are closest to SUNS’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ICAD 13 21814 0
CHS 18 31204 1
AAOI 8 12005 -5
SBBX 6 8649 -1
Average 11.25 18418 -1.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 11.25 hedge funds with bullish positions and the average amount invested in these stocks was $18 million. That figure was $1 million in SUNS’s case. Chico’s FAS, Inc. (NYSE:CHS) is the most popular stock in this table. On the other hand Sussex Bancorp (NASDAQ:SBBX) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks Solar Senior Capital Ltd (NASDAQ:SUNS) is even less popular than SBBX. Hedge funds clearly dropped the ball on SUNS as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. 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 7.9% in 2020 through May 22nd and still beat the market by 15.6 percentage points. A small number of hedge funds were also right about betting on SUNS as the stock returned 35.7% so far in the second quarter and outperformed the market by an even larger margin.

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