Between June 25 and October 30th the Russell 2000 ETF (IWM) lagged the larger S&P 500 ETF (SPY) by more than 14 percentage points as investors worried over the possible ramifications of rising interest rates. The hedge funds and institutional investors we track typically invest more in smaller-cap stocks than an average investor, and we have seen data that shows those funds paring back their overall exposure. Those funds cutting positions in small-caps is one reason why volatility has increased. In the following paragraphs, we take a closer look at what hedge funds and prominent investors think of Sohu.com Inc (NASDAQ:SOHU) and see how the stock is affected by the recent hedge fund activity.
Sohu.com Inc (NASDAQ:SOHU) was in 17 hedge funds’ portfolios at the end of September. SOHU has experienced a decrease in hedge fund sentiment in recent months. There were 23 hedge funds in our database with SOHU positions at the end of the previous quarter. At the end of this article we will also compare SOHU to other stocks including Celestica Inc. (USA) (NYSE:CLS), Old National Bancorp (NASDAQ:ONB), and KapStone Paper and Packaging Corp. (NYSE:KS) to get a better sense of its popularity.
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Today there is a multitude of methods shareholders have at their disposal to assess stocks. Some of the less utilized methods are hedge fund and insider trading sentiment. Our experts have shown that, historically, those who follow the best picks of the elite hedge fund managers can beat the broader indices by a significant margin (see the details here).
Now, let’s view the new action regarding Sohu.com Inc (NASDAQ:SOHU).
What does the smart money think about Sohu.com Inc (NASDAQ:SOHU)?
At Q3’s end, a total of 17 of the hedge funds tracked by Insider Monkey were long this stock, a change of -26% from one quarter earlier. With hedge funds’ sentiment swirling, there exist a few key hedge fund managers who were boosting their stakes significantly (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, Orbis Investment Management, managed by William B. Gray, holds the biggest position in Sohu.com Inc (NASDAQ:SOHU). Orbis Investment Management has an $285.5 million position in the stock, comprising 2.4% of its 13F portfolio. The second most bullish fund manager is Lei Zhang of Hillhouse Capital Management, with an $68.2 million position; the fund has 1.4% of its 13F portfolio invested in the stock. Remaining peers that are bullish comprise Jim Simons’s Renaissance Technologies, John Overdeck and David Siegel’s Two Sigma Advisors and Israel Englander’s Millennium Management.
Judging by the fact that Sohu.com Inc (NASDAQ:SOHU) has experienced a declination in interest from the aggregate hedge fund industry, logic holds that there lies a certain “tier” of money managers who sold off their full holdings heading into Q4. At the top of the heap, Kerr Neilson’s Platinum Asset Management sold off the largest stake of the 700 funds tracked by Insider Monkey, comprising an estimated $43.2 million in stock. Rob Citrone’s fund, Discovery Capital Management, also dumped its stock, about $33.6 million worth. These moves are intriguing to say the least, as total hedge fund interest fell by 6 funds heading into Q4.
Let’s now take a look at hedge fund activity in other stocks similar to Sohu.com Inc (NASDAQ:SOHU). We will take a look at Celestica Inc. (USA) (NYSE:CLS), Old National Bancorp (NASDAQ:ONB), KapStone Paper and Packaging Corp. (NYSE:KS), and Carrizo Oil & Gas, Inc. (NASDAQ:CRZO). This group of stocks’ market valuations are similar to SOHU’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CLS | 12 | 16772 | -5 |
| ONB | 8 | 22015 | 0 |
| KS | 24 | 157560 | 0 |
| CRZO | 23 | 161382 | -2 |
As you can see these stocks had an average of 16.75 hedge funds with bullish positions and the average amount invested in these stocks was $89 million. That figure was $437 million in SOHU’s case. KapStone Paper and Packaging Corp. (NYSE:KS) is the most popular stock in this table. On the other hand Old National Bancorp (NASDAQ:ONB) is the least popular one with only 8 bullish hedge fund positions. Sohu.com Inc (NASDAQ:SOHU) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard, KS might be a better candidate to consider a long position.
