How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding Silvergate Capital Corporation (NYSE:SI) and determine whether hedge funds had an edge regarding this stock.
Silvergate Capital Corporation (NYSE:SI) has experienced an increase in hedge fund sentiment recently. Silvergate Capital Corporation (NYSE:SI) was in 32 hedge funds’ portfolios at the end of the third quarter of 2021. The all time high for this statistic was previously 31. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that SI 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. Now we’re going to check out the new hedge fund action encompassing Silvergate Capital Corporation (NYSE:SI).
Emanuel Friedman of EJF Capital
Do Hedge Funds Think SI Is A Good Stock To Buy Now?
At the end of the third quarter, a total of 32 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 3% from the second quarter of 2021. Below, you can check out the change in hedge fund sentiment towards SI over the last 25 quarters. With hedgies’ capital changing hands, there exists a few noteworthy hedge fund managers who were increasing their stakes significantly (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, Emanuel J. Friedman’s EJF Capital has the largest position in Silvergate Capital Corporation (NYSE:SI) , worth close to $134.6 million, corresponding to 11.8% of its total 13F portfolio. The second largest stake is held by Zevenbergen Capital Investments, managed by Nancy Zevenbergen, which holds a $101.8 million position; the fund has 1.9% of its 13F portfolio invested in the stock. Other members of the smart money with similar optimism consist of Catherine D. Wood’s ARK Investment Management, Peter S. Park’s Park West Asset Management and John Overdeck and David Siegel’s Two Sigma Advisors. In terms of the portfolio weights assigned to each position EJF Capital allocated the biggest weight to Silvergate Capital Corporation (NYSE:SI) , around 11.75% of its 13F portfolio. Zevenbergen Capital Investments is also relatively very bullish on the stock, earmarking 1.93 percent of its 13F equity portfolio to SI.
Consequently, key money managers were leading the bulls’ herd. Granite Point Capital, managed by Warren Lammert, assembled the most valuable position in Silvergate Capital Corporation (NYSE:SI) . Granite Point Capital had $2.9 million invested in the company at the end of the quarter. Paul Tudor Jones’s Tudor Investment Corp also made a $1.5 million investment in the stock during the quarter. The following funds were also among the new SI investors: Karim Abbadi and Edward McBride’s Centiva Capital and Peter Algert’s Algert Global.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Silvergate Capital Corporation (NYSE:SI) but similarly valued. These stocks are CryoPort, Inc. (NASDAQ:CYRX), Blend Labs Inc. (NYSE:BLND), Axos Financial, Inc. (NYSE:AX), Liberty Latin America Ltd. (NASDAQ:LILAK), Chindata Group Holdings Limited (NASDAQ:CD), AdaptHealth Corp. (NASDAQ:AHCO), and Liberty Latin America Ltd. (NASDAQ:LILA). This group of stocks’ market caps are closest to SI’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CYRX | 18 | 163168 | -4 |
| BLND | 19 | 487745 | 19 |
| AX | 12 | 39551 | 1 |
| LILAK | 28 | 522455 | 1 |
| CD | 13 | 126458 | 3 |
| AHCO | 21 | 471946 | 1 |
| LILA | 14 | 130595 | -2 |
| Average | 17.9 | 277417 | 2.7 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 17.9 hedge funds with bullish positions and the average amount invested in these stocks was $277 million. That figure was $516 million in SI’s case. Liberty Latin America Ltd. (NASDAQ:LILAK) is the most popular stock in this table. On the other hand Axos Financial, Inc. (NYSE:AX) is the least popular one with only 12 bullish hedge fund positions. Compared to these stocks Silvergate Capital Corporation (NYSE:SI) is more popular among hedge funds. Our overall hedge fund sentiment score for SI is 86. 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, SI wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on SI were disappointed as the stock returned -6.7% 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.
