The Insider Monkey team has completed processing the quarterly 13F filings for the September quarter submitted by the hedge funds and other money managers included in our extensive database. Most hedge fund investors experienced strong gains on the back of a strong market performance, which certainly propelled them to adjust their equity holdings so as to maintain the desired risk profile. As a result, the relevancy of these public filings and their content is indisputable, as they may reveal numerous high-potential stocks. The following article will discuss the smart money sentiment towards Switchback Energy Acquisition Corporation (NYSE:SBE).
Is Switchback Energy Acquisition Corporation (NYSE:SBE) a healthy stock for your portfolio? Hedge funds are betting on the stock. The number of bullish hedge fund bets rose by 17 in recent months. Our calculations also showed that SBE isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Phill Gross of Adage Capital Management
We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius’ weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock already gained 20 percent. With all of this in mind we’re going to take a look at the fresh hedge fund action encompassing Switchback Energy Acquisition Corporation (NYSE:SBE).
What have hedge funds been doing with Switchback Energy Acquisition Corporation (NYSE:SBE)?
At Q3’s end, a total of 17 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 17 from one quarter earlier. On the other hand, there were a total of 0 hedge funds with a bullish position in SBE a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Of the funds tracked by Insider Monkey, Adage Capital Management, managed by Phill Gross and Robert Atchinson, holds the biggest position in Switchback Energy Acquisition Corporation (NYSE:SBE). Adage Capital Management has a $24 million position in the stock, comprising 0.1% of its 13F portfolio. The second largest stake is held by Simon Sadler of Segantii Capital, with a $15 million position; the fund has 2% of its 13F portfolio invested in the stock. Some other hedge funds and institutional investors that are bullish contain Paul Glazer’s Glazer Capital, David Costen Haley’s HBK Investments and Alec Litowitz and Ross Laser’s Magnetar Capital. In terms of the portfolio weights assigned to each position Yaupon Capital allocated the biggest weight to Switchback Energy Acquisition Corporation (NYSE:SBE), around 3.29% of its 13F portfolio. Segantii Capital is also relatively very bullish on the stock, designating 2.04 percent of its 13F equity portfolio to SBE.
As aggregate interest increased, specific money managers have been driving this bullishness. Adage Capital Management, managed by Phill Gross and Robert Atchinson, created the biggest position in Switchback Energy Acquisition Corporation (NYSE:SBE). Adage Capital Management had $24 million invested in the company at the end of the quarter. Simon Sadler’s Segantii Capital also initiated a $15 million position during the quarter. The other funds with brand new SBE positions are Paul Glazer’s Glazer Capital, Paul Glazer’s Glazer Capital, and David Costen Haley’s HBK Investments.
Let’s go over hedge fund activity in other stocks similar to Switchback Energy Acquisition Corporation (NYSE:SBE). These stocks are Verrica Pharmaceuticals Inc. (NASDAQ:VRCA), Miller Industries, Inc. (NYSE:MLR), ORBCOMM Inc (NASDAQ:ORBC), and Cross Country Healthcare, Inc. (NASDAQ:CCRN). This group of stocks’ market valuations are closest to SBE’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| VRCA | 3 | 72329 | -2 |
| MLR | 10 | 59784 | 2 |
| ORBC | 14 | 62666 | 1 |
| CCRN | 14 | 31200 | 6 |
| Average | 10.25 | 56495 | 1.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 10.25 hedge funds with bullish positions and the average amount invested in these stocks was $56 million. That figure was $109 million in SBE’s case. ORBCOMM Inc (NASDAQ:ORBC) is the most popular stock in this table. On the other hand Verrica Pharmaceuticals Inc. (NASDAQ:VRCA) is the least popular one with only 3 bullish hedge fund positions. Compared to these stocks Switchback Energy Acquisition Corporation (NYSE:SBE) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately SBE wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on SBE were disappointed as the stock returned 0.5% during the first two months of the fourth quarter 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 70 percent of these stocks already outperformed the market in Q4.
Disclosure: None. This article was originally published at Insider Monkey.