The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 873 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 June 30th. In this article we look at what those investors think of SMART Global Holdings, Inc. (NASDAQ:SGH).
Is SMART Global Holdings, Inc. (NASDAQ:SGH) a buy here? Prominent investors were turning bullish. The number of long hedge fund bets inched up by 4 lately. SMART Global Holdings, Inc. (NASDAQ:SGH) was in 20 hedge funds’ portfolios at the end of the second quarter of 2021. The all time high for this statistic was previously 18. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that SGH isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still 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). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.
Paul Marshall of Marshall Wace
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 check out the new hedge fund action regarding SMART Global Holdings, Inc. (NASDAQ:SGH).
Do Hedge Funds Think SGH Is A Good Stock To Buy Now?
At second quarter’s end, a total of 20 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 25% from the previous quarter. The graph below displays the number of hedge funds with bullish position in SGH over the last 24 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Silver Lake Partners held the most valuable stake in SMART Global Holdings, Inc. (NASDAQ:SGH), which was worth $253.1 million at the end of the second quarter. On the second spot was Crosslink Capital which amassed $30.5 million worth of shares. Arrowstreet Capital, LMR Partners, and Millennium Management 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 Crosslink Capital allocated the biggest weight to SMART Global Holdings, Inc. (NASDAQ:SGH), around 5.05% of its 13F portfolio. Silver Lake Partners is also relatively very bullish on the stock, designating 1.64 percent of its 13F equity portfolio to SGH.
As one would reasonably expect, specific money managers were leading the bulls’ herd. LMR Partners, managed by Ben Levine, Andrew Manuel and Stefan Renold, established the most valuable position in SMART Global Holdings, Inc. (NASDAQ:SGH). LMR Partners had $7.2 million invested in the company at the end of the quarter. Paul Marshall and Ian Wace’s Marshall Wace LLP also made a $4.5 million investment in the stock during the quarter. The other funds with brand new SGH positions are Paul Tudor Jones’s Tudor Investment Corp, Jonathan Guo’s Yiheng Capital, and Michael Gelband’s ExodusPoint Capital.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as SMART Global Holdings, Inc. (NASDAQ:SGH) but similarly valued. We will take a look at GreenTree Hospitality Group Ltd. (NYSE:GHG), Atrion Corporation (NASDAQ:ATRI), Ready Capital Corporation (NYSE:RC), Merchants Bancorp (NASDAQ:MBIN), PetIQ, Inc. (NASDAQ:PETQ), Olema Pharmaceuticals, Inc. (NASDAQ:OLMA), and Connect Biopharma Holdings Limited (NASDAQ:CNTB). This group of stocks’ market valuations resemble SGH’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| GHG | 7 | 11439 | 1 |
| ATRI | 12 | 52103 | 4 |
| RC | 11 | 55337 | 1 |
| MBIN | 15 | 42409 | 2 |
| PETQ | 13 | 60953 | 3 |
| OLMA | 17 | 624367 | -2 |
| CNTB | 7 | 160502 | -8 |
| Average | 11.7 | 143873 | 0.1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 11.7 hedge funds with bullish positions and the average amount invested in these stocks was $144 million. That figure was $341 million in SGH’s case. Olema Pharmaceuticals, Inc. (NASDAQ:OLMA) is the most popular stock in this table. On the other hand GreenTree Hospitality Group Ltd. (NYSE:GHG) is the least popular one with only 7 bullish hedge fund positions. Compared to these stocks SMART Global Holdings, Inc. (NASDAQ:SGH) is more popular among hedge funds. Our overall hedge fund sentiment score for SGH is 89. 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 SGH as the stock returned 4.6% 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.
