Hedge Funds Are Crazy About Sonos, Inc. (SONO)

Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that’s why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to the smartest analysts and expensive data/information sources that individual investors can’t match. So should one consider investing in Sonos, Inc. (NASDAQ:SONO)? The smart money sentiment can provide an answer to this question.

Sonos, Inc. (NASDAQ:SONO) investors should pay attention to an increase in hedge fund sentiment recently. Sonos, Inc. (NASDAQ:SONO) was in 49 hedge funds’ portfolios at the end of September. The all time high for this statistic was previously 47. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that SONO 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. With all of this in mind let’s view the key hedge fund action regarding Sonos, Inc. (NASDAQ:SONO).

Jeremy Mindich of Scopia Capital

Do Hedge Funds Think SONO Is A Good Stock To Buy Now?

At the end of September, a total of 49 of the hedge funds tracked by Insider Monkey were long this stock, a change of 4% from the second quarter of 2021. Below, you can check out the change in hedge fund sentiment towards SONO over the last 25 quarters. So, let’s check out 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, D E Shaw, managed by D. E. Shaw, holds the largest position in Sonos, Inc. (NASDAQ:SONO). D E Shaw has a $74.6 million position in the stock, comprising 0.1% of its 13F portfolio. The second largest stake is held by Newbrook Capital Advisors, managed by Robert Boucai, which holds a $58 million position; 4.2% of its 13F portfolio is allocated to the stock. Remaining members of the smart money with similar optimism contain Ken Griffin’s Citadel Investment Group, Jacob Mitchell’s Antipodes Partners and David Brown’s Hawk Ridge Management. In terms of the portfolio weights assigned to each position Ararat Capital allocated the biggest weight to Sonos, Inc. (NASDAQ:SONO), around 8.3% of its 13F portfolio. Stony Point Capital is also relatively very bullish on the stock, setting aside 5.03 percent of its 13F equity portfolio to SONO.

As aggregate interest increased, key money managers were breaking ground themselves. Newbrook Capital Advisors, managed by Robert Boucai, created the largest position in Sonos, Inc. (NASDAQ:SONO). Newbrook Capital Advisors had $58 million invested in the company at the end of the quarter. Matt Sirovich and Jeremy Mindich’s Scopia Capital also made a $39.8 million investment in the stock during the quarter. The other funds with new positions in the stock are Spencer M. Waxman’s Shannon River Fund Management, David Fiszel’s Honeycomb Asset Management, and Parsa Kiai’s Steamboat Capital Partners.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Sonos, Inc. (NASDAQ:SONO) but similarly valued. We will take a look at Spectrum Brands Holdings, Inc. (NYSE:SPB), Safehold Inc. (NYSE:SAFE), Vonage Holdings Corp. (NASDAQ:VG), BRF SA (NYSE:BRFS), Nevro Corp (NYSE:NVRO), Inari Medical, Inc. (NASDAQ:NARI), and Apollo Medical Holdings, Inc. (NASDAQ:AMEH). This group of stocks’ market caps resemble SONO’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 20.9 hedge funds with bullish positions and the average amount invested in these stocks was $342 million. That figure was $647 million in SONO’s case. Spectrum Brands Holdings, Inc. (NYSE:SPB) is the most popular stock in this table. On the other hand BRF SA (NYSE:BRFS) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks Sonos, Inc. (NASDAQ:SONO) is more popular among hedge funds. Our overall hedge fund sentiment score for SONO is 87. 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 28.6% in 2021 through November 30th and still beat the market by 5.6 percentage points. Unfortunately SONO wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on SONO were disappointed as the stock returned -2.2% since the end of the third quarter (through 11/30) 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 most of these stocks already outperformed the market since 2019.

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Disclosure: None. This article was originally published at Insider Monkey.