We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Keeping this in mind let’s see whether Sogou Inc. (NYSE:SOGO) represents a good buying opportunity at the moment. Let’s quickly check the hedge fund interest towards the company. Hedge fund firms constantly search out bright intellectuals and highly-experienced employees and throw away millions of dollars on satellite photos and other research activities, so it is no wonder why they tend to generate millions in profits each year. It is also true that some hedge fund players fail inconceivably on some occasions, but net net their stock picks have been generating superior risk-adjusted returns on average over the years.
Is Sogou Inc. (NYSE:SOGO) the right investment to pursue these days? The best stock pickers are buying. The number of long hedge fund positions improved by 7 recently. Our calculations also showed that SOGO isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
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 monthly stock picks returned 72.9% since March 2017 and outperformed the S&P 500 ETFs by more than 41 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.
Ken Griffin of Citadel Investment Group
We leave no stone unturned when looking for the next great investment idea. For example, Federal Reserve and other Central Banks are tripping over each other to print more money. As a result, we believe gold stocks will outperform fixed income ETFs in the long-term. So we are checking out investment opportunities like this one. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences (by the way watch this video if you want to hear one of the best healthcare hedge fund manager’s coronavirus analysis). 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 take a peek at the recent hedge fund action regarding Sogou Inc. (NYSE:SOGO).
What have hedge funds been doing with Sogou Inc. (NYSE:SOGO)?
At the end of the fourth quarter, a total of 11 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 175% from the previous quarter. The graph below displays the number of hedge funds with bullish position in SOGO over the last 18 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.
Among these funds, Renaissance Technologies held the most valuable stake in Sogou Inc. (NYSE:SOGO), which was worth $9.4 million at the end of the third quarter. On the second spot was Arrowstreet Capital which amassed $1.1 million worth of shares. D E Shaw, Weld Capital Management, and Citadel Investment Group 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 Weld Capital Management allocated the biggest weight to Sogou Inc. (NYSE:SOGO), around 0.1% of its 13F portfolio. Stevens Capital Management is also relatively very bullish on the stock, designating 0.03 percent of its 13F equity portfolio to SOGO.
With a general bullishness amongst the heavyweights, specific money managers have been driving this bullishness. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, initiated the biggest position in Sogou Inc. (NYSE:SOGO). Arrowstreet Capital had $1.1 million invested in the company at the end of the quarter. D. E. Shaw’s D E Shaw also made a $0.8 million investment in the stock during the quarter. The following funds were also among the new SOGO investors: Minhua Zhang’s Weld Capital Management, Matthew Tewksbury’s Stevens Capital Management, and Donald Sussman’s Paloma Partners.
Let’s also examine hedge fund activity in other stocks similar to Sogou Inc. (NYSE:SOGO). These stocks are LTC Properties Inc (NYSE:LTC), Cavco Industries, Inc. (NASDAQ:CVCO), NBT Bancorp Inc. (NASDAQ:NBTB), and Northwest Bancshares, Inc. (NASDAQ:NWBI). This group of stocks’ market caps match SOGO’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| LTC | 10 | 36725 | 0 |
| CVCO | 20 | 170519 | -1 |
| NBTB | 7 | 13039 | 1 |
| NWBI | 19 | 66676 | -1 |
| Average | 14 | 71740 | -0.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 14 hedge funds with bullish positions and the average amount invested in these stocks was $72 million. That figure was $13 million in SOGO’s case. Cavco Industries, Inc. (NASDAQ:CVCO) is the most popular stock in this table. On the other hand NBT Bancorp Inc. (NASDAQ:NBTB) is the least popular one with only 7 bullish hedge fund positions. Sogou Inc. (NYSE:SOGO) 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 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 13.0% in 2020 through April 6th but beat the market by 4.2 percentage points. Unfortunately SOGO wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); SOGO investors were disappointed as the stock returned -25.9% during the same time period 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 most of these stocks already outperformed the market in 2020.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
