Did Hedge Funds Catch A Break With Sonos, Inc. (SONO)?

The latest 13F reporting period has come and gone, and Insider Monkey have plowed through 867 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 September 30th, when the S&P 500 Index was trading around the 4300 level. Since then investors decided to bet on the economic recovery and a stock market rebound even though we experienced a temporary correction in January. In this article you are going to find out whether hedge funds thought Sonos, Inc. (NASDAQ:SONO) was a good investment heading into the fourth quarter and how the stock traded in comparison to the top hedge fund picks.

Sonos, Inc. (NASDAQ:SONO) investors should be aware of an increase in enthusiasm from smart money of late. Sonos, Inc. (NASDAQ:SONO) was in 49 hedge funds’ portfolios at the end of the third quarter of 2021. The all time high for this statistic was previously 47. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that SONO isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).

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. Keeping this in mind let’s take a look at the recent hedge fund action surrounding Sonos, Inc. (NASDAQ:SONO).

David Brown of Hawk Ridge Management

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

Heading into the fourth quarter of 2021, a total of 49 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 4% from the previous quarter. The graph below displays the number of hedge funds with bullish position in SONO over the last 25 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in Sonos, Inc. (NASDAQ:SONO) was held by D E Shaw, which reported holding $74.6 million worth of stock at the end of September. It was followed by Newbrook Capital Advisors with a $58 million position. Other investors bullish on the company included Citadel Investment Group, Antipodes Partners, and Hawk Ridge Management. In terms of the portfolio weights assigned to each position Ararat Capital allocated the biggest weight to Sonos, Inc. (NASDAQ:SONO), around 8.3% of its 13F portfolio. Stony Point Capital is also relatively very bullish on the stock, setting aside 5.03 percent of its 13F equity portfolio to SONO.

As one would reasonably expect, specific money managers have jumped into Sonos, Inc. (NASDAQ:SONO) headfirst. Newbrook Capital Advisors, managed by Robert Boucai, assembled the most valuable position in Sonos, Inc. (NASDAQ:SONO). Newbrook Capital Advisors had $58 million invested in the company at the end of the quarter. Matt Sirovich and Jeremy Mindich’s Scopia Capital also initiated a $39.8 million position during the quarter. The other funds with brand new SONO positions are Spencer M. Waxman’s Shannon River Fund Management, David Fiszel’s Honeycomb Asset Management, and Parsa Kiai’s Steamboat Capital Partners.

Let’s check out hedge fund activity in other stocks similar to Sonos, Inc. (NASDAQ:SONO). We will take a look at Spectrum Brands Holdings, Inc. (NYSE:SPB), Safehold Inc. (NYSE:SAFE), Vonage Holdings Corp. (NASDAQ:VG), BRF SA (NYSE:BRFS), Nevro Corp (NYSE:NVRO), Inari Medical, Inc. (NASDAQ:NARI), and Apollo Medical Holdings, Inc. (NASDAQ:AMEH). All of these stocks’ market caps match SONO’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 20.9 hedge funds with bullish positions and the average amount invested in these stocks was $342 million. That figure was $647 million in SONO’s case. Spectrum Brands Holdings, Inc. (NYSE:SPB) is the most popular stock in this table. On the other hand BRF SA (NYSE:BRFS) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks Sonos, Inc. (NASDAQ:SONO) is more popular among hedge funds. Our overall hedge fund sentiment score for SONO is 87. 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 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 29.6% in 2021 and still beat the market by 3.6 percentage points. Unfortunately, SONO wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on SONO were disappointed as the stock returned -22.1% since the end of the third quarter (through 1/31) 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 all of these stocks already outperformed the market since 2019.

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