Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips or bumps on the charts usually don’t make them change their opinion towards a company. This time it may be different. The coronavirus pandemic destroyed the high correlations among major industries and asset classes. We are now in a stock pickers market where fundamentals of a stock have more effect on the price than the overall direction of the market. As a result we observe sudden and large changes in hedge fund positions depending on the news flow. Let’s take a look at the hedge fund sentiment towards SandRidge Energy Inc. (NYSE:SD) to find out whether there were any major changes in hedge funds’ views.
Is SandRidge Energy Inc. (NYSE:SD) a healthy stock for your portfolio? Hedge funds were getting more bullish. The number of long hedge fund bets increased by 3 lately. SandRidge Energy Inc. (NYSE:SD) was in 21 hedge funds’ portfolios at the end of June. The all time high for this statistic is 23. Our calculations also showed that SD isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).
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. Hedge funds have more than $3.5 trillion in assets under management, so you can’t expect their entire portfolios to beat the market by large margins. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 79 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds’ moves today.
J. Carlo Cannell of Cannell Capital
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. 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. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. With all of this in mind we’re going to go over the new hedge fund action encompassing SandRidge Energy Inc. (NYSE:SD).
Do Hedge Funds Think SD Is A Good Stock To Buy Now?
At Q2’s end, a total of 21 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 13 hedge funds with a bullish position in SD a year ago. With hedgies’ sentiment swirling, there exists a select group of key hedge fund managers who were boosting their stakes significantly (or already accumulated large positions).
Among these funds, Icahn Capital LP held the most valuable stake in SandRidge Energy Inc. (NYSE:SD), which was worth $30.3 million at the end of the second quarter. On the second spot was Cannell Capital which amassed $19.9 million worth of shares. Renaissance Technologies, D E Shaw, and Two Sigma Advisors 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 Cannell Capital allocated the biggest weight to SandRidge Energy Inc. (NYSE:SD), around 3.19% of its 13F portfolio. Nokomis Capital is also relatively very bullish on the stock, earmarking 0.8 percent of its 13F equity portfolio to SD.
As aggregate interest increased, some big names have been driving this bullishness. PDT Partners, managed by Peter Muller, established the most valuable position in SandRidge Energy Inc. (NYSE:SD). PDT Partners had $0.4 million invested in the company at the end of the quarter. Dmitry Balyasny’s Balyasny Asset Management also initiated a $0.2 million position during the quarter. The following funds were also among the new SD investors: Paul Marshall and Ian Wace’s Marshall Wace LLP, Peter Algert’s Algert Global, and Bruce Kovner’s Caxton Associates LP.
Let’s now review hedge fund activity in other stocks similar to SandRidge Energy Inc. (NYSE:SD). These stocks are Fluent, Inc. (NASDAQ:FLNT), Pangaea Logistics Solutions, Ltd. (NASDAQ:PANL), Horizon Global Corp (NYSE:HZN), Corbus Pharmaceuticals Holdings Inc (NASDAQ:CRBP), Monroe Capital Corp (NASDAQ:MRCC), Sterling Bancorp, Inc. (NASDAQ:SBT), and Tiziana Life Sciences plc (NASDAQ:TLSA). All of these stocks’ market caps resemble SD’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| FLNT | 7 | 2836 | -4 |
| PANL | 8 | 4924 | 6 |
| HZN | 8 | 49772 | -1 |
| CRBP | 8 | 15108 | 3 |
| MRCC | 2 | 2566 | -1 |
| SBT | 5 | 3680 | 0 |
| TLSA | 3 | 460 | 1 |
| Average | 5.9 | 11335 | 0.6 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 5.9 hedge funds with bullish positions and the average amount invested in these stocks was $11 million. That figure was $68 million in SD’s case. Pangaea Logistics Solutions, Ltd. (NASDAQ:PANL) is the most popular stock in this table. On the other hand Monroe Capital Corp (NASDAQ:MRCC) is the least popular one with only 2 bullish hedge fund positions. Compared to these stocks SandRidge Energy Inc. (NYSE:SD) is more popular among hedge funds. Our overall hedge fund sentiment score for SD is 85.4. 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 returned 24% in 2021 through October 22nd but still managed to beat the market by 1.6 percentage points. Hedge funds were also right about betting on SD as the stock returned 90% since the end of June (through 10/22) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
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Disclosure: None. This article was originally published at Insider Monkey.
